Close. By the way there is a bk _scat command (sccs cat, not poop) that dumps the ascii file format so you can try this and see.

The delete needs to be an envelope around the insert so you get

  ^AD 3
  ^AI 1
  this is the first line in the first version.
  ^AE 1
  ^AE 3
  ^AI 2
  this is the line that was added in the second version
  ^AE 2

That whole weave thing is really cool. The only person outside of BK land that got it was Braam Cohen in Codeville, I think he had a weave.