The code for gnome_canvas_text_point() in gnome-canvas-text.c is
totally broken. It "works" only be accident, since in most
environments (i.e. unless your canvas is big) a bogus large rectangle
is checked for point.

Consider the code in the pango_layout_get_iter loop.
First the case where text->clip is true:

			x1 = PANGO_PIXELS (log_rect.x);
			y1 = PANGO_PIXELS (log_rect.y);
			x2 = PANGO_PIXELS (log_rect.x+log_rect.width);
			y2 = PANGO_PIXELS (log_rect.y+log_rect.height);

It then proceeds to intersect this rectangle with the clip rectangle
(text->clip_cx etc). But the latter are absolute canvas coordinates,
but the pango coordinates are relative to the text item's reference point
so the above should probably read:

			x1 = text->cx + PANGO_PIXELS (log_rect.x);
			y1 = text->cy + PANGO_PIXELS (log_rect.y);
                        ...

The non-clip case is even more broken:

			x1 = text->x;
			y1 = text->y;
			x2 = log_rect.width;
			y2 = log_rect.height;	

It then proceeds to compare this values with cx and cy, resp., which are
absolute canvas coordinates. Now text->x is in world coordinates,
and also relative to the containing item group's reference point.
On the other hand, log_rect.width is in pango units (which are
several orders of magnitude large than canvas, i.e. pixel, units).

I think a correct computation should look like this:

        do {
 	        PangoRectangle log_rect;

		pango_layout_iter_get_line_extents (iter, NULL, &log_rect);
				
		x1 = text->cx + PANGO_PIXELS (log_rect.x);
		y1 = text->cy + PANGO_PIXELS (log_rect.y);
		x2 = text->cx + PANGO_PIXELS (log_rect.x+log_rect.width);
		y2 = text->cy + PANGO_PIXELS (log_rect.y+log_rect.height);

		if (text->clip) {
	    
			if (x1 < text->clip_cx)
				x1 = text->clip_cx;

			if (y1 < text->clip_cy)
				y1 = text->clip_cy;

			if (x2 > (text->clip_cx + text->clip_width))
				x2 = text->clip_cx + text->clip_width;

			if (y2 > (text->clip_cy + text->clip_height))
				y2 = text->clip_cy + text->clip_height;

			if ((x1 >= x2) || (y1 >= y2))
				continue;

		}

		/* Calculate distance from point to rectangle */
                ...