Shawn Hargreaves:It's the result of having a card that only supports a limited set of functionality for non pow2 textures. See the SupportsNonPower2Conditional caps bit documentation for details.
I see the issue now, however I'm somewhat disappointed that the sample makes no note that this is not a good technique to use because it won't work on graphics cards that don't fully support non power of 2 textures which is most of them as far as I can tell. :(
After reading the documentation for SupportsNonPower2Conditional basically, if your graphics card (like mine) has
GraphicsDeviceCapabilities.TextureCapabilities.RequiresPower2 == true
GraphicsDeviceCapabilities.TextureCapabilities.SupportsNonPower2Conditional == true
You're limited to Clamp when drawing non power of 2 textures.