Ok, here's a small file that shows the bug:

%%% cut here %%%
\documentclass[12pt]{report}
\usepackage[Glenn]{fncychap}

\begin{document}
\chapter*{A starred chapter}
\chapter{This is a chapter}
\end{document}
%%% cut here %%%

Here's a context diff of the patch:

%%% cut here %%%
*** fncychap.sty	Fri Apr 28 15:40:33 2000
--- fncychap.sty.new	Fri Apr 28 15:47:57 2000
***************
*** 17,22 ****
--- 17,24 ----
  %%%                  skip of line.
  %%%
  %%% Last modified    April 6th 1997
+ %%%
+ %%% Patch (Tomas.Lundberg@epl.ericsson.se) April 28th 2000
  
  \NeedsTeXFormat{LaTeX2e}[1995/12/01]
  \ProvidesPackage{fncychap}
***************
*** 193,198 ****
--- 195,201 ----
    \ChRuleWidth{1pt}
    \ChNameUpperCase
    \ChTitleUpperCase
+   \newlength{\backskip}
    \renewcommand{\DOCH}{%
      \settoheight{\myhi}{\CTV\FmTi{Test}}
      \setlength{\py}{\baselineskip}
***************
*** 218,229 ****
    \renewcommand{\DOTIS}[1]{%
      \setlength{\py}{10pt}
      \setlength{\pyy}{\py}
      \addtolength{\pyy}{\RW}
      \setlength{\myhi}{\baselineskip}
      \addtolength{\myhi}{\pyy}
      \mghrulefill{\RW}\rule[-1\py]{2\RW}{\pyy}\par\nobreak
  %    \addtolength{}{}
! \vskip -1\baselineskip
      \rule{2\RW}{\myhi}\mghrulefill{\RW}\hskip 2pt
      \raggedleft\CTV\FmTi{#1}\par\nobreak
      \vskip 60\p@}
--- 221,234 ----
    \renewcommand{\DOTIS}[1]{%
      \setlength{\py}{10pt}
      \setlength{\pyy}{\py}
+     \setlength{\backskip}{\py}
+     \addtolength{\backskip}{2pt}
      \addtolength{\pyy}{\RW}
      \setlength{\myhi}{\baselineskip}
      \addtolength{\myhi}{\pyy}
      \mghrulefill{\RW}\rule[-1\py]{2\RW}{\pyy}\par\nobreak
  %    \addtolength{}{}
!     \vskip -1\backskip
      \rule{2\RW}{\myhi}\mghrulefill{\RW}\hskip 2pt
      \raggedleft\CTV\FmTi{#1}\par\nobreak
      \vskip 60\p@}