Hi Fredd,
It depends on your point of view, to what the function should do. What you may expect it to do may be different from how someone else may expect it to do. Therefore fixing what you may see as a bug, might cause problems with the way someone else is using the product.
To be honest, the way the function currently works is how I'd expect it to work, by removing the unnessessary microsoft styles added by word, but not actually changing the structure of the HTML. But that is my point of view. Perhaps 'cleaning' is an incorrect term to be using. The user manual says that it "pastes text copied from microsoft word and removes the web-unfriendly tags". It doesn't say it would modify p's to div's (which are both valid tags), and as such I wouldn't expect it to.
PasteText just pastes the plain text from the clip board (no bold, or other formatting either). New lines are replaced with <br /> tags regardless of the BreakElement setting. In this scenario I think it would make more sense to use the BreakElement setting because the editor is 'inserting' HTML into the pasted text, and as such I'd expect it to use the editors setting.
Many Thanks,
Ady