Yes it does. It disassembles pdf1 by extracting pages 1-3 and disassembles pdf2 by extracting pages 4-5. Then re-assembles the two subsets into a new PDF.
You could extract page1 from pdf1 only and create a pdf, then page2 of pdf1 into a different PDF using something similar to:
<?xml version="1.0" encoding="UTF-8"?>
<PDF source="PDF1.pdf" pages="1"/>
<PDF source="PDF1.pdf" pages="2"/>
You can also use the PDFFromBookmarks tag to generate a new document for each level 1 bookmark created in a PDF.
You can get more info at http://livedocs.adobe.com/livecycle/8.2/ddxRef/000640.html
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