Hi Detlef,

At Tue, 9 Aug 2011 16:19:26 +0200,
Detlef Steuer wrote:
>
> Hi!
>
> Using the following files I can reproduced a bug I encountered.
>
> [...]

Thanks for reporting. I pushed a fix for both problems, the wrong
level and eating the existing headline.

However:
> Should be
>
> ---
> ** Subheading 1
> *** TODO first
>
> ** Subheading 2
> ---

No, it should be:

** Subheading 1
** TODO first
** Subheading 2

C-h f org-paste-subtree RET

,----
| org-paste-subtree is an interactive Lisp function in `org.el'.
|
| (org-paste-subtree &optional LEVEL TREE FOR-YANK)
|
| Paste the clipboard as a subtree, with modification of headline level.
| The entire subtree is promoted or demoted in order to match a new headline
| level.
|
| If the cursor is at the beginning of a headline, the same level as
| that headline is used to paste the tree
|
| If not, the new level is derived from the *visible* headings
| before and after the insertion point, and taken to be the inferior headline
| level of the two.  So if the previous visible heading is level 3 and the
| next is level 4 (or vice versa), level 4 will be used for insertion.
| This makes sure that the subtree remains an independent subtree and does
| not swallow low level entries.
`----

To get level 3 you can call paste with numeric prefix of 3 or indicate
the desired level with three stars.

Best,
  -- David
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