Drag and Drop (Nested) Reference Error

Greetings-

I've noticed a curious behavior when dragging-and dropping references using MicroStation V8i SS3 (08.11.09.397). 

I have my default reference attachment settings (MS_RED_DEFAULTSETTINGS) to

TrueScale=1,AttachMethod=CoincidentWorld

When I attach a file using Tools-->Attach in the References dialog, the file attaches normally (i.e. as expected). 

If I attach it by dragging and dropping as file from Windows, I get the dialog that asks how to attach it, and when I select any method other than Recommended, the file attaches normally. 

If I attach it by dragging and dropping as file from Windows and choosing Recommended, the file attaches with Live Nesting enables 99 levels deep.  This is certainly not desired!

Is this a bug?  I can reproduce it on other PCs.  I did not see a note on this being fixed in the 459 build. 

Thanks!