Hi PSC
Does seem something is not working correctly. With VP3.10 and 2.41 (both free versions) and using the steps I outlined, the image or clip INSERTS, i.e. performs a split, inserts the new bit and then adds the cut off section to the end of the new bit. Does this whether an image or a clip is inserted or whether it is an image or clip that is split by the curser line.
What happens with your version if you use a single clip or image on video track 1 and then add another clip/image to the cursor set in the middle? Does it still overwrite?
Check you have not chosen to "Overlay on sequence at the cursor" which is one of the choices shown in the drop down menu. This action WON'T split the sequence line and the added clip/image will overplay it.
Note also that if you are adding your clip/image to the sequence line at the cursor position at a point where you have something on the overlay track, it will add correctly but it will not appear as the overlay track takes precedence.
In some variations of this procedure, the new clip is inserted on the sequence correctly but the overlay track above is also split and a gap created allowing the inserted clip to play...
There are so many permutations that can arise here that I am not surprised the program may not work quite as expected.
Nat