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Check the keyboard shortcuts are the same.
I'm having the same problem.
This is very annoying and needs to be fixed.
I posted about this a week or 2 ago. Apparently that post was lost when the forum system crashed. (Personally, I like this "old" format better)
The insert and overlay keys work from the source monitor. Thats how its supposed to work. Thats why they put the Insert and Overlay Buttons on the source monitor. On the Program Monitor they have Lift and Extract buttons.
None of them work direct from the timeline so thats why the shortcut keys do not work when focussed on the timeline pane.
The above post makes sense to me, but Premiere 2.0 did allow you to Insert and Overlay whether the Source monitor was in focus or not, hence the complaint when the OP upgraded to CS3.
My guess is Adobe changed behavior to what they thought it should be.