OK, I did some playing around, and I created a table that has 3 rows, and I entered this formula in the first record of my table:
and then it populated it down for the other two rows like this automatically:
However, when I went to insert a new row between row 1 and row 2, it repeated
in this new row.
This kind of makes sense, when you think about it. Since you already have formulas increasing by one for every row that you go down, the second record in your table (before the insert) is associated with a certain record from the other sheet. Inserting a new record, Excel isn't sure what you want to do with that. There is a very good chance you may not want to change the current record associations with every record below that. So it simply copies the formula from the row above.
Note however if you select the original formula in the first row again, and double-click on the lower right corner of that cell, it will re-do the autofill, renumbering all those formulas, so it will change from (in my example):
Excel Formula:
=Sheet1!A1
=Sheet1!A1
=Sheet1!A2
=Sheet1!A3
to:
Excel Formula:
=Sheet1!A1
=Sheet1!A2
=Sheet1!A3
=Sheet1!A4
So I would say this is probably expected, justifiable behavior.
I think Microsoft sometimes gets itself in trouble when it assumes too much (which is why I hate Word so much!). I would rather it not assume anything and let me make the decision.