(I'm an svn newbie, so I don't know if what I'm trying to do is even possible but...)
I've set up a simple test repository to try a few things out. At present it looks like this:
TestSVN
|--Folder A
| |--FileA.txt
| |--FileB.txt
|--Folder B
|--FileB.txt
FileB exists in Folder A as an svn:external link. So this works as I expect, when I update Folder A it pulls in the current version of FileB.
Now lets say I change FileB in Folder A and commit the change. I would expect when looking at my working copy of Folder B that Tortoise would indicate that my working copy of FileB (in Folder B) is out of date. Conversely, if I change FileB in Folder B, I'd expect to see that my FileB in Folder A is not the same as the version in the repository. It doesn't appear to do this - Tortoise shows that both working copies are 'OK', even though they are the 'same file' and are different.
Am I misunderstanding how SVN works in general, or is this actually broken?
Am I misunderstanding how SVN works in general
Yes
And "yes" for meaning|using|changing of overlay icons in TortoiseSVN
Working Copy of any repository is autonomous system most time and does not communicate with repository freely (only on demand for checkout|commit|status)
Overlay icons are only indicators of $CURRENT state of object vs $VANILLA state (i.e revision, into which WC was updated|checkouted), and vanilla-state stored also locally in WC