So the greyed-out parts here seem to say that we're going to get
~/.emacs on the remote host...  and hitting RET does indeed give me
that.

To get the ~/.emacs on the local machine, I have to delete everything in
the minibuffer and type ~/.emacs.

I've been tripped up by this before, because I'm so used to just typing
`C-x C-f ~/.emacs RET' without even looking (to get to my local .emacs
file).  But I think the current behaviour is the intended one, really --
it's consistent, powerful and makes sense.

So I'm closing this bug report -- I think this is working as intended.

-- 
(domestic pets only, the antidote for overdose, milk.)
   bloggy blog: http://lars.ingebrigtsen.no