I'm having some strange problems with the Offset Curve tool. It's not exactly behaving the way I want it to.

And as the relative beginner I am, I'm not sure how to troubleshoot this properly, so I turn to you guys. Instead of trying to describe this in text, I've recorded it as a small movie (500kb) in QuickTime.

- See the problem in action here (QuickTime required)

Any hints as to what might be the problem would be grateful. I have tried different combinations of settings in the options, but to no avail.