After poking around here, it seems as though many of us have run into various forms of brownout issues. Personally, I had a problem where the IR receiver would detect garbage whenever the servos were buzzing. After doing some testing, it seems as though the 5V rail on mine was ~5.1V normally but dropped to ~4.5V when the servos buzzed.
Motors cause noise and voltage dips on power rails. This is a well known issue that many robot projects have to deal with. Some do it with extra filtering, careful distribution, or even multiple power sources (like my ancient WAO II that has two separate battery packs). So I was quite surprised to discover that the mePed does none of these. Anyways, I figured simply adding a capacitor to the 5V rail would help. So I did, by jamming it in the "bluetooth" connector socket, and it worked!
Its a 220uF 10V electrolytic capacitor I found in one of my assortment boxes. Nothing special, but it seems to do the trick.