"That's not a bug, it's a feature." The output you've got there is 100% correct and according to specifications.
I'll explain the purpose of ARVO a bit more thoroughly here. ARVO is intended to relieve you of the burden of assigning machine-level variables and flags to your LOGIC-level variables and flags. As a feature, I added the ability to declare different scopes, to represent how the variables will be used in the game. This just means that, if you have some variables that will never be used at the same time, you can declare them in separate scopes, and ARVO, to save space, will name them as the same variable or flag. If you wanted the sample.xml file to produce no overlapping declarations, just edit out all of the <scope> and </scope> tags.
Mokalus of Borg
PS - It'll probably be easiest and most intuitive to use ARVO without scopes.
PPS - It usually won't be necessary, anyway.