Rebasing with submodule change causes red herring with --continue

I have a branch that contains a commit with a single change: A submodule pointing to a new SHA1.

When I rebase this branch onto the tip of its parent branch AND that parent branch had modified that same submodule, the rebase stops at the commit on my branch that modified the submodule and asks me if I want to keep REMOTE or LOCAL. I say LOCAL and notice immediately that the submodule is not staged (normally it would be).

I do:

$ git add my-submodule

Then I do:

$ git rebase --continue

At this point, it fails asking me if I forgot to stage changes and recommends doing --skip. This is normally what you would see if the staging area was completely empty, however it isn't, since I see the submodule is in there.

Is this a bug or am I missing a fundamental here? I'm using Git 2.1.0 on Windows through MSYS. I'll provide more concrete examples if my summary of the issue doesn't "ring any bells".