implicit casting bug or feature?

During development i stumbled upon a strange behaviour in 8.2.4
Here is the case:

CREATE TYPE testretval AS (tval text);

CREATE OR REPLACE FUNCTION test() RETURNS testretval AS $$
DECLARE
_r record;
retval testretval%ROWTYPE;
BEGIN
SELECT 'test'::character(20) as tc INTO retval;
RETURN retval;
END;
$$ LANGUAGE plpgsql SECURITY DEFINER;

orderdb_test=# select '-'||tval||'-' from test();
?column?
------------------------
-test -

Why is this still blank padded? Shouldn't a character(20) -> text
conversion
happen implicitly when the value is selected into the return type
that is declared as text?
The casting to text itself seems to work just fine:

orderdb_test=# select '-'||('test'::character(20))::text||'-';
?column?
----------
-test-

I just want to understand a bit better about the internals of how
this works.
should it use this cast when selecting to the return type?

from casts view i see that:
          Source type         |         Target type         |       
Function       |   Implicit?
-----------------------------+----------------------------- 
+---------------------+---------------
  character                   | text                        |  
text                | yes

Kristo Kaiv
http://kaiv.wordpress.com (PostgreSQL blog)