Funny.
On Windows XP, FAT32, Eclipse it gives compilation time error:
Class file collision: A resource exists with a different case: /server/bin/misc/java_forums/C.class.
On FreeBSD 6.3-STABLE example compiles and runs well.
I think it is potentially dangerous to give identical case insensitive names to few classes in the same package. Java is somehow system-dependent here, since it puts classes to files and it may come to hell as soon as not all filesystems are case-sensitive.