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.

But it's much more like the latter. All the newly-inserted songs appear together (and, if shuffle is turned on, shuffled among themselves).

What tanstaafl's trying to say, is that if you've previously inserted stuff, the new stuff will play after what you inserted before. This means that if you insert three songs (in three separate visits to the menu or search system), they will play in the order in which you chose them. We're considering changing the name from "Insert" to "Queue" to make this more obvious.

Peter