display property strangeness

[Chong Yidong]

This is a strange one. Evaluate the following two functions. Both of
them should do the same thing: replace each of the first 3 letters in
the buffer with the letter "A".

(defun foo ()
  (interactive)
  (let ((pos '(1 2 3)))
    (while pos
      (put-text-property (car pos) (1+ (car pos)) 'display "A")
      (setq pos (cdr pos)))))

(defun bar ()
  (interactive)
  (progn (put-text-property 1 2 'display "A")
         (put-text-property 2 3 'display "A")
         (put-text-property 3 4 'display "A")))

The amazing thing is that the first one doesn't work. Open up a new,
empty buffer and enter the string

12345

Type M-x foo. You end up with

A45

Now undo that, and type M-x bar. That gives you the correct result:

AAA45

Why does the first function give nonsensical results?