The clip follows this scenario:
Open top level model
Put it in nesting (n)
go to the model currently holding the minfig
Select the minifig
Replace it with any normal brick/part (double click in bin)
Go to top level model (end)
Select the tmp brick
Clone that brick (ins) and place it at the same location
Go to the model currently holding the minfig (end)
delete the tmp brick
Go to the top level model (end)
replace the tmp brick (still selected) with the minifig (double click in bin)
As for the wrong target model behavior, I think you went into nesting mode while a selection was active, this could affect the target insertion model (a message is given in such a case though).
File submodel content should never be deleted unless you use 'delete model' from the model menu. Are you sure you didn't delete the parts while being in nesting mode, because in such a case the original minfig parts will be removed from it's containing model and all references will point to the now empty file. This is the reason you have to use a 'tmp brick' so you're using the minifig reference instead of it's contents when replacing things.
I'll play around later this week to see if i can get it to mall function, but as far I know nesting has been very stable in the recent versions ( I use it a lot myself so it's tested all the time
).