I've been trying to get filters-displace-01-f.svg from the W3C test
suite to work with the latest version of SVN.

me too!

1. The images are defined with via relative paths. If I replace the
relative paths with absolute paths (or I run inkscape from the svg
directory) I can get the images to display. I filed a bug report earlier
on this: 181993.

yes, this is true. This behaviour is determined by the primitiveUnits=ObjectBoundingBox attribute

2. feImage as implemented in Inkscape is using absolute coordinates when
I believe the filter coordinate system should be used. If I add height,
width, x, and y attributes in absolute svg coordinates to svg:feImage I
can get the images in the test to display.

there is something strange, though. This test sets x,y,width and height parameters on the <feImage/> primitive node, but SVG spec says feImage doesn't have such parameters; it should inheirit them from the <filter/> node.
Am I mistaken? or the filters-displace-01-f.svg from the W3C test
suite is really non-compliant?

I have just noticed that I have implemented feImage node with these attributes in it. The code should be changed so that these parameters are read from the <filter/> node. Also, there should be a place on filter effects dialog to configure <filter/> node parameters. There should be placed the x,y,width and height parameters that currently are mistakenly placed inside feImage settings UI. There should also be a "filterUnits" and a "primitiveUnits" combobox at the <filter/> settings. This combobox would give the user 2 options: userSpaceOnUse | objectBoundingBox

Juca