leading "--" changes whether `~' is expanded?

[Karl Kleinpaste]

This question arose on the Gnus development list, in debugging why
./configure's invocation was not behaving as expected.

[1546] [08:51:55] cinnamon:~> echo $BASH_VERSION
2.05.0(1)-release
[1546] [08:51:56] cinnamon:~> echo ./configure prefix=~karl
./configure prefix=/home/karl
[1547] [08:52:03] cinnamon:~> echo ./configure --prefix=~karl
./configure --prefix=~karl

The difference is only in whether the "--" is part of the last
argument.  It was further observed that 1.14 expands the `~'
regardless of the presence of "--".

Any reason why this is the case?  It doesn't seem (from reading the
bash 2.05 manual page) that the conception of a "word" in Tilde
Expansion should be affected by the dashes.