>> Quoting does not work for these cases. If I try to rename a symlink to the
>> literal string '~eggert' on my machine, Emacs will misbehave as described and
>> there is no way to quote the string naming the symlink to fix this.
> 
> That is but one use case of many.  In other cases, quoting does work.

My point is that there is a bug in some cases. I agree that in other cases, 
make-symbolic-link does work.

> your proposed changes will disallow some of the
> users' capabilities to do what you want.

With the proposed changes a user can create a local symlink to an any string 
supported by the operating system. This change increases users' capabilities, 
compared to what they can do now. This change does not take away any capabilities.

> they seem to
> sacrifice a very common interactive use case on behalf of a much more
> rare and obscure one.  I'm talking about a user typing this:
> 
>    M-x make-symbolic-link RET ~/foo/bar RET /toto/quux RET

Good suggestion, also made by others. Revised patch attached.