The problem was due to the Z register replacement pass.
When we add the "save Z register" instruction at end of
a replacement block, it can happen that the insn is
added in the next basic block (the insn is in the correct
place, but not in the good basic block).  Later, when
the register life analysis is made, because the last save Z
register instruction is not in the good basic block
gcc thinks that the register is dead which is not true
(because it's used in the next basic block).

Workarround:  use -ffixed-z

Will be fixed in 3.0.1

The attached lsqrt function (also provided with GEL) returns 32767 if compiled with -Os and -fomit-frame-pointer. Removing either one of the switches fixes the bug.

To reproduce, compile with

m6811-elf-gcc -fomit-frame-pointer -Wall -mshort -m68hcs12 -Os -g lsqrt.c -o lsqrt