Rule problem with OLD / NEW record set

Hello everyone,

given is a table with a version history kind of thing I am currently 
working on. Upon this table there is a view and the application interacts 
with the view only, updating/inserting/deleting is controlled by rules. It 
seems like the record set "OLD" gets changed when it is used in a SQL 
expression:

CREATE TABLE table1  (  id INTEGER NOT NULL,  version INTEGER NOT NULL DEFAULT 0,  vnoflag CHAR(1),  content
VARCHAR(20) );
 

INSERT INTO table1 (id, version, vnoflag, content) VALUES (1, 1, 'Y', 
'Test');

CREATE VIEW view_table1 AS SELECT * FROM table1;

-- create a rule for update
CREATE OR REPLACE RULE ru_view_table1_update
AS
ON UPDATE TO view_table1 DO INSTEAD  (  -- insert a new record with the old id, old version number incremented  -- by
one,versionflag set to 'Y' and the new content  INSERT INTO table1 (id, version, vnoflag, content) VALUES (OLD.id, 
 
OLD.version+1, 'Y', NEW.content);  -- update the old version and set its versionflag to 'N' as it is no  -- longer the
currentrecord  UPDATE table1 SET vnoflag = 'N' WHERE id = OLD.id AND version = 
 
OLD.version;  );


SELECT * FROM view_table1; id | version | vnoflag | content
----+---------+---------+---------  1 |       1 | Y       | Test
(1 row)

UPDATE view_table1 SET content = 'New Test' WHERE id = 1 AND vnoflag = 
'Y';
SELECT * FROM view_table1; id | version | vnoflag | content
----+---------+---------+----------  1 |       1 | N       | Test  1 |       2 | N       | New Test

It seems like the UPDATE statement updates both the old and the new 
version. If I correctly go through the statements by hand, they should 
read:

INSERT INTO table1 (id, version, vnoflag, content) VALUES (1, 1+1, 'Y', 
'New Test');
UPDATE table1 SET vnoflag = 'N' WHERE id = 1 AND version = 1;


If I change the UPDATE statement to read:
  UPDATE table1 SET vnoflag = 'N' WHERE id = OLD.id AND vno = NEW.vno-1;

it works like expected:
 id | version | vnoflag | content
----+---------+---------+----------  1 |       2 | Y       | New Test  1 |       1 | N       | Test

Where is my logical error? Shouldn't the first UPDATE statement suffice?

Best regards
... Ralph ...