When I insert a playlist, and have shuffle on, will it blend the new playlist or shuffle JUST the new playlist in the middle of the current one?

Neither.

It will insert the new unshuffled playlist immediately after the currently playing song, unless that song happens to be from a previously inserted playlist and is followed by (even with shuffle on) another song from that same previously inserted playlist -- in which case the new playlist will be inserted after the second song.

There is an interesting aspect to inserting and shuffling playlists described here.

tanstaafl.