Rob,
Is this the same issue I helped you with this afternoon? I hadn't seen this come thru the Cow forum's notification yet.
1) Yes, best to use BBedit or Text Wrangler and save the files as plain text ".txt" files. I always use utf-8 with unix line breaks.
2) Insert Caption should work fine. Just leave it blank and it will make the previous caption expire at the timecode set on the blank caption.
3) This could have been the timecode issue I mentioned in the email to you this afternoon. Since the last timecode came only 20 frames after the previous caption, it didn't leave it enough buffer time to display and caused an invalid file.
I have a SCC file troubleshooting blog post here that may be helpful in the future:
http://synchrimedia.blogspot.com/2011/06/troubleshooting-scc-line-21-captio...