I'm recording a video about this right now. It'll be part of the FAQ list soon.
Thanks... now, all that is needed is some new code in Jiveware (shudder... new code + Jive = chaos!) that will force a brand new member to read all of the FAQ articles before being allowed to post a message
My issue with this is that people often deploy this advice like it is a Magic Bullet that will fix all playback issues. It is not, and will not. If Premiere cannot properly playback a clip in the Source Monitor, there is no way that it is going to properly playback a clip in a sequence, regardless of the sequence settings.
This shortcut needs to be recognized for what it is: a shortcut. I actually rarely use it, because I don't like how it randomly applies editing modes that frequently don't match the footage--this command is not very smart. This is a command that works OK when 1) you're in a hurry, 2) feeling lazy, or 3) don't know what you're doing. It has its value and place, but if a user is experiencing playback issues, telling them to drop the troublesome clip on the New Item button is only going to exacerbate the situation. The footage needs to be interpreted first, or sometimes fixed or even replaced externally before going ahead with this shortcut.
I suspect I am in the minority here, but I think a caveat/asterisk needs to be added whenever and wherever this shortcut is implicated.