Panic: Template variable unbound in rewrite rule

Installing singletons-1.0 with GHC 7.8.2 on both OS X 10.9.2 and Ubuntu 2014.04 fails:

ghc: panic! (the 'impossible' happened)
  (GHC version 7.8.2 for x86_64-apple-darwin):
        Template variable unbound in rewrite rule

This seems to be an issue with the optimizer, as the bug only appears with optimization level 2, using the following line in ~/.cabal/config:

optimization: 2

See also goldfirere/singletons#83