The quick launch (or current navigation) in out-of-the-box SharePoint 2010 lets you show two tiers, which show up as headings (tier 1) and links under those headings (tier 2).
When you set the current navigation to:
Display only the navigation items below the current site
...It shows each "heading" from the current site's navigation as a tier 1 heading, and each "link" from the current site's navigation as a tier 2 link.
So far, so good; a heading is a heading and a link is a link.
However, when you set the current navigation to:
Display the current site, the navigation items below the current site, and the current site's siblings
...It will instead show each site--including the current site and any sibling sites--as a tier 1 heading, and it will show each "heading" from the current site's navigation as a tier 2 link.
This means that your headings are essentially being demoted to links!
Since the current navigation only has room for two tiers, there's no place left for the "links" from the current navigation... it won't add "tier 3" links below your others.
Showing the sibling sites can be nice-- it achieves a basic "accordion" like navigation effect, where you can switch between sites at the same level very easily-- but the downside is that it limits your options with respect to headings/subheadings on the quick launch.
