If setting 

worktree = <Some directory other than where .git folder is>

then attempting to stage changes to files does not work. I have had it simply fail with an error, but more disturbingly, I have had it delete the changed files!

Openning terminal and doing

git add .

works fine and the commit works fine.

Note that attempting to add a repository with a working tree as a subtree in another repository also fails in strange and destructive ways.