OK, I was able to replicate it on your demo.  First, enter three lines of text, say:

 

List Element 1

List Element 2

List Element 3

 

Then make the second element a bullet.  No problem right? 

Now select Clean Up HTML and split the elements up again into three lines again using carriage returns.  When you try to make the second element a bullet again the make one large bullet grouping all three elements under the same bullet.  From this point on, every bullet, justification and indent modification treats all three lines as one group.

 

Hope this helps debugging.