@Kovid
I was just thinking about your answer and don't know what the best solution is as I was aware about this behavior and workaround it sometimes. It have a certain charm implementing parts of Word's WYSIWYG. On the other hand however, when you turn on the format indicator in Word (what is quite usual for me if I doing more than using Word as a type writer) this is at least for me an irritating behavior too. The list items are in the document and eliminating/hiding them by default in a conversion is maybe also a point for further discussions.
Only a idea, there should be a documented switch for this kind of manipulation/behavior if you like to implement this (both, for conversion or for direct opening with the editor).
@kidflash,
I took a quick look at your document. I recognize an other point in your document. You are aware of different format setups for same list elements? (see attached picture)
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