bug#8331: UNIX Environment variables get lost in ver23.3 as opposed to 23.2

[Vishwajith Singh]

I switched to using the latest version of emacs 23.3. and am finding an issue.
The issues is that the ENV variables defined in the shell are lost within a buffer.

Here's an example:
1) //Define an ENV variable call FOO
UNIX setenv FOO FOO_VALUE
2) Open up a file in emacs called junk in the same window
3) In this new file, execute the shell command Ctrl-U Shift-! "echo $FOO"
You are basically echoing the value of $FOO into the buffer junk.

This works in emacs ver23.2 but fails in ver23.3 with the message "FOO: Undefined variable."

Why is this difference of behaviour in the latest version?
Can someone suggest a workaround..

Thanks,
- V