See http://www.git.code-experiments.com/blog/2011/01/manage-large-files-with-git-annex-by-joey-hess.html

If a local repo is cloned with "git clone orig/.git new", then git-annex in new cannot see origin.

the .git/config has "url=/.../orig/.git". Apparently git is ok with that weird construction; probably it treats it as a bare git repo. But git-annex just sees a directory w/o a .git subdir, and gives up.

Just tested, and the new support for bare repositories didn't solve this. (Because config.bare is not set.)

I think this is not something git-annex should go out of its way to support. done --Joey

Later.. Fixed this after all. --Joey