I can reproduce it on your demo page. I dont send anything nowadays without first trying it on your demo site!

 

I just pasted in the text in the html view.

Then switched back to normal.

Did some typeing, then clicked undo.

All that was left was the <p>hello</p> bit.

 

I tried it on all versions of IE and it does the same, it seems to work fine in firefox.

 

regards