The Traverse sub does plenty of assigning of the filenames too - readdir has to work on these first, then its loaded into $file then that forms part of $path, so it can't be that!

I strongly suggest using perl -d on your program - you can then use the x, W, and b and r commands to track down what is really happening to this data.

Apart from that, I would say that Traverse works because it's too simple not to :)