Hello vertigoelectric,
You can add clips into the middle of the file the same way as you do to the beginning or to the end: you just drag the file you want to be inserted and drop to the necessary position pointed by the mouse cursor. To correctly drop the file it is recommended to select a suitable zoom level.
I have tried this several times, but when I drop the file onto the timeline onto an existing media, it doesn't insert it at the point where I dropped it. It also does some other strange things that are a bit hard to explain right now. I think what I might have to do is record a video of what's happening so you can see.
As for your other method, it sounds a lot like the same way I would "insert" a clip in Avidemux.... essentially cutting out everything after the desired point, appending the clip, then pasting the cut content back. I could give it a try.
Oh, and how do you "collapse the interval", as you mentioned in step 5?
Thanks so much for your help!