Hello, I am using a current git pull (Org-mode version 8.0.3, release_8.0.3-345-g239aa7) and noticed behavior that's easiest to show with a small example. If you save and visit the following org file,
https://dl.dropboxusercontent.com/u/7514404/test.org you will see the behavior described and documented (assuming it's reproducible under your version of emacs and orgmode). Briefly M-<RET> at the end of a *folded* headline that contains plain list items will insert a new plain list item at the end of the subtree, instead of a new top-level headline. I believe this conflicts with the documentation for M-<RET>, which currently reads: ... If the command is used at the end of a folded subtree (i.e., behind the ellipses at the end of a headline), then a headline like the current one will be inserted after the end of the subtree... Best, --Erik