TEXFORMATS = .;$TEXMF/web2c{/$engine,}
Jonathan and I already made a similar change (for bases and mems too):
.;$TEXMF/web2c/{$engine,}
I guess your version avoids the recursive search, searching only the
engine dir and the top-level dir. Hmm. That does seem better.
I'll make that change unless some reason not to bubbles up ...
Thanks,
k