Created attachment 59071 [details]
97655

Can reproduce it with OOo2.4.1

I successfully replicated the bug in Open Office 2.4.1 under Windows XP
Professional running service pack 2. I followed the steps provided by the
original reporter, and it appears that the validity function under tools does
not correctly apply to an area of cells selected. If you set the validity of a
single cell to a range of cells, it works fine, but when selecting an area of
cells to apply validity to, it seems to offset every cell except the last one
that was in the selection process. 
 
As you move through each cell, the drop down list shifts upwards or downwards by
one spot every time. If your last selected cell is in the top left corner of the
selected area, the list seems to scroll up, meaning the first value is initially
seen, the last value is in the last spot of course, but selecting the next cell,
the initial value is no longer seen, and the last value is now in the second
last spot. This pattern holds as you move through each cell one by one. Now if
you drag from top left to bottom right to select cells, meaning your last
selected cell is in the bottom right corner, the bottom right cell of the
selection shows the values fine, but every other cell shows “REF#â€. 
 
The blue coloured area in my posted file was selected from top left to bottom
right, and referenced the cell range of A1 to B8. The bottom right cell shows
the correct values, but the first cells above or to the left of this cell show
“REF#â€. The green area was selected from bottom right to top left and also
referenced A1 to B8. The top left cell shows the correct values, but as you move
down, they begin to shift with the validated area, and eventually, cell C6 shows
up in the list. 
 
I suspect  that as you move through each cell that is validated, when you change
the selected cell within the selected range, the area of validation also shifts
relative to the cell you are currently on. So the reason why some cells would
show “REF#†is because when your range includes A1 as one of the points, the
cell tries to read left or above this cell, which is not defined, hence the
“REF#†value, which I interpret as an error or undefined. To prove this, what I
did for my final test is instead of selecting cells A1 to B4 as my range, I
instead selected B4 to C6 as my range of validity. The selected area I used is
the red one, and I highlight from top left to bottom right so my last selected
cell is on the bottom right of the red area. So as I move up, I should not see
any “REF#†references, since the top left of B4 is defined as a proper cell. As
I move up, I would expect to eventually see cell A1 in this selection. After
testing, this proved to be true as seen in the screenshot provided. 
 
If you wanted each cell to have the same validation, you would have to go
through each cell one by and set them manually. 

Created attachment 61313 [details]
The file corresponding to my test cases list above

I cannot see any error. If you enter a range A1:B8 then it is a relative
address. When you enter it while the cell cursor is set to cell G10 it means
"row-9 column-6". The same information is written to the cell E1, but there
doesn't exist any cells at the position "row-9 column-6". That is the way
relative addresses work.

If you want the same range A1:B8 for the whole area E1:G10, you can use absolute
addressing $A$1:$B$8.

You see the same behavior, if you use conditional formatting.

Perhaps this issue should be closed as invalid according to Regina's comment.

Regards