strange overlapping instance error

[Dave Herman]

I'm a little mystified by an overlapping instance error I'm getting from 
GHC (I'm using v6.6.1 in Windows). Here's a simple test case that 
demonstrates the type error:

-----

{-# OPTIONS_GHC -fglasgow-exts #-}
module Overlap where

class Needle a

instance Needle String

class Needle b => Haystack a b where
   find :: a -> [b]

instance Needle a => Haystack a a where
   find a = [a]

instance Haystack a b => Haystack [a] b where
   find xs = concatMap find xs

data Tree = Leaf String
           | Node [Tree]

instance Haystack Tree String where
   find (Leaf s) = find s
   find (Node ss) = concatMap find ss

-----

The error is:

overlap.hs:21:18:
     Overlapping instances for Haystack String String
       arising from use of `find' at overlap.hs:21:18-23
     Matching instances:
       instance (Needle a) => Haystack a a -- Defined at overlap.hs:11:0
       instance (Haystack a b) => Haystack [a] b
	-- Defined at overlap.hs:14:0
     In the expression: find s
     In the definition of `find': find (Leaf s) = find s
     In the definition for method `find'

Now, I understand that String is [Char], but since the proposition 
(Haystack Char String) is not true, I don't understand why the type 
checker is claiming that the second instance declaration matches.

Thanks,
Dave