It strikes me as a temporary issue - long term, if I have a “pull from github” and “push to github” button, I won’t need or want to mess about with the documents directory. It might make sense to allow tabs for non-Lua stuff like a README or other things synched from a repo… LOL, I can see distributing a game with a nice game manual, or short story. Arty!
So - yeah. Probably want to not delete that stuff long term. What you said. 
I had my .bzr directory at the top level and so all my projects are part of one repository. That avoided the clobbering issue, but as I said something wasn’t working. It sounds as though it might work with git though, I’ll give it a go.
An alternative strategy that I thought of is the following. I’m only going to use the repository information when my iPad is connected to my PC, so I don’t actually need the .bzr directory on the iPad itself (it helps with portability, but even there my bzr workflow wouldn’t be affected by it as I use a centralised system). So I could have the root of the repository an honest directory on my PC and then mount the Codea directory as a subdirectory of this. That way the .bzr remains on the PC and the documents stay on the iPad.