C array problems. Compiler bug? or not.

Ok, right now im working with Watcom C Version 10.0a
and ive either found some sort of bug (hope not) or
ive missed something very obvious.

The following code is what ive writen, and i'll outline the
problem after.
-----

#include <stdio.h>

int main()
{
  char string[10];

  string[0] = 0;
  printf("String[0] = %d",string[0]);

  return 0;
}

Ok, the code above ive had no problem with at all, no errors etc etc, BUT the code below buggers up BIG time! :(

#include <stdio.h>
#include <stdlib.h>

int main()
{
  char *string;

  string = (char *)malloc(10);

  // for the sake of peoples getting through the code
  // quickly, just note, i KNOW there is enough memory
  // avail. And string has never been NULL yet.

  string[0] = 0;
  printf("String[0] = %d",string[0]);

  return 0;
}

Ok, now this code prints '0' to the stdout, as it should.
BUT ive done other things with this and ended up needing to
go into WD (Watcom Debugger) and traced through the code,
the problem is this,

The first code segment included sets string[0] to 0, Perfect!, But setting the var string[0] to 0 in the second segment of code seems to cause problems!, WD is has the value of string[0] as ????

(Note: all other elements in the allocated array are set-able and work fine except the first one!, and some of my functions get very confused with the value of ???? whatever that is!, although printf STILL outputs a '0' to stdout for it.)

Also remember setting string[0] for the static array works fine, not the allocated one.

HELP!!! what is going on?!, I really need to find out how
to get past this, as i cant use static var's for what i want to do, its just an example! ;)

Thanks for your help.

Chris.