diff --git a/CLAUDE.md b/CLAUDE.md
index 1143dcf..7a442ce 100644
--- a/CLAUDE.md
+++ b/CLAUDE.md
@@ -95,3 +95,49 @@ From AGENTS.md and Obsidian best practices:
 - Keep startup lightweight; defer heavy work until needed
 - Use stable command IDs (don't rename after release)
 - Provide sensible defaults for all settings
+
+## Sidebar View Architecture
+
+### Key Files
+- `src/views/todo-sidebar-view.ts` — Main sidebar panel (`TodoSidebarView` extends `ItemView`)
+- `src/views/todo-item-component.ts` — Pure DOM factory for individual todo `<li>` elements
+- `src/core/todo-parser.ts` — Parses markdown into `TodoGroup[]` with nested `TodoItem` trees
+- `src/core/todo-transformer.ts` — Pure functions for modifying file content (toggle, move, indent)
+- `src/modals/note-select-modal.ts` — First step of cross-file move: pick target note
+- `src/modals/heading-select-modal.ts` — Second step: pick heading within target note
+
+### Data Flow
+1. `parseTodosGroupedByHeading(content)` → `TodoGroup[]` (each group has a heading + tree of todos)
+2. `buildTodoTree(flatTodos)` — stack-based algorithm: todos whose indent > parent's become children
+3. `renderGroups()` renders each group; `createTodoItemEl()` renders items recursively
+4. `flatTodoList: FlatTodoEntry[]` is rebuilt each render for keyboard navigation
+
+### Event Listener Lifecycle (Critical)
+- **Register keydown listener ONCE in `onOpen()`**, not in `renderGroups()` — otherwise listeners accumulate on every file change and arrow keys skip items
+- Use `this.currentFile` inside handlers instead of closure variables (file changes between renders)
+- `registerEvent()` wrappers handle cleanup automatically on view close
+
+### Keyboard Navigation
+- `focusedIndex = -1` means panel is not yet activated (no visual focus)
+- First ArrowDown/ArrowUp when `focusedIndex === -1` sets it to 0 (activates focus like Outline view)
+- `flatTodoList` flattens the entire tree depth-first; arrow keys walk this list linearly
+- Container has `tabindex="0"` so it can receive keyboard events without stealing focus on render
+
+### Drag and Drop
+- Parent `<li>` and all nested `<li>` are `draggable="true"`; `stopPropagation` on `dragstart` prevents child drag from bubbling to parent
+- `handleDragStart` stores `draggedTodo` and `draggedChildLines` (via `collectChildLineNumbers`)
+- Item drop zones use 3 zones (top/middle/bottom thirds):
+  - Top → insert above
+  - Middle → nest as child (increase indent, insert after target's last descendant)
+  - Bottom → insert below
+- Group (heading) drop zones allow dropping onto the heading area to move to end of that section
+- `performNest` adjusts indentation with `indentTodoLines(lines, delta)` before inserting
+
+### Hotkey Matching (Platform-Aware)
+- Uses `app.hotkeyManager.getHotkeys(commandId)` and `getDefaultHotkeys(commandId)` (internal API)
+- `Platform.isMacOS` distinguishes Mod (Cmd on Mac, Ctrl on Windows) from Ctrl
+- See `matchesHotkey()` in `todo-sidebar-view.ts` for the full matching logic
+
+### Cross-File Move
+- Always pass `addBlankLine: true` to `insertTodoUnderHeading` from modals — inserts a blank line between the heading and the moved todo for readability
+- In-file drag moves use `moveTodoWithChildren` directly (no blank line needed)
diff --git a/src/core/todo-transformer.test.ts b/src/core/todo-transformer.test.ts
index 0bfba9e..ed5d3ec 100644
--- a/src/core/todo-transformer.test.ts
+++ b/src/core/todo-transformer.test.ts
@@ -6,6 +6,7 @@ import {
 	insertTodoUnderHeading,
 	moveTodoWithChildren,
 	moveTodoUnderHeadingInFile,
+	indentTodoLines,
 } from './todo-transformer';
 
 describe('toggleTodo', () => {
@@ -256,3 +257,61 @@ describe('moveTodoUnderHeadingInFile', () => {
 		expect(result).toBe('## H1\n## H2\n- [ ] A\n## H3');
 	});
 });
+
+describe('indentTodoLines', () => {
+	it('should indent a single line by one level', () => {
+		const result = indentTodoLines(['- [ ] Hello'], 1);
+		expect(result).toEqual(['  - [ ] Hello']);
+	});
+
+	it('should indent multiple lines', () => {
+		const result = indentTodoLines(['- [ ] Parent', '  - [ ] Child'], 1);
+		expect(result).toEqual(['  - [ ] Parent', '    - [ ] Child']);
+	});
+
+	it('should outdent by one level', () => {
+		const result = indentTodoLines(['  - [ ] Hello'], -1);
+		expect(result).toEqual(['- [ ] Hello']);
+	});
+
+	it('should not outdent past zero indent', () => {
+		const result = indentTodoLines(['- [ ] Hello'], -1);
+		expect(result).toEqual(['- [ ] Hello']);
+	});
+
+	it('should handle zero delta (no-op)', () => {
+		const result = indentTodoLines(['  - [ ] Hello'], 0);
+		expect(result).toEqual(['  - [ ] Hello']);
+	});
+
+	it('should indent by multiple levels', () => {
+		const result = indentTodoLines(['- [ ] Hello'], 2);
+		expect(result).toEqual(['    - [ ] Hello']);
+	});
+});
+
+describe('insertTodoUnderHeading with blank line', () => {
+	it('should insert with blank line after heading when no next heading', () => {
+		const content = '# Heading\nExisting content';
+		const result = insertTodoUnderHeading(content, 0, '- [ ] New todo', undefined, true);
+		expect(result).toBe('# Heading\n\n- [ ] New todo\nExisting content');
+	});
+
+	it('should insert with blank line after empty heading', () => {
+		const content = '# Only heading';
+		const result = insertTodoUnderHeading(content, 0, '- [ ] New todo', undefined, true);
+		expect(result).toBe('# Only heading\n\n- [ ] New todo');
+	});
+
+	it('should insert with blank line before next heading', () => {
+		const content = '# H1\n# H2';
+		const result = insertTodoUnderHeading(content, 0, '- [ ] New todo', 1, true);
+		expect(result).toBe('# H1\n\n- [ ] New todo\n# H2');
+	});
+
+	it('should not double blank line if one already exists after heading', () => {
+		const content = '# Heading\n\nExisting content';
+		const result = insertTodoUnderHeading(content, 0, '- [ ] New todo', undefined, true);
+		expect(result).toBe('# Heading\n\n- [ ] New todo\nExisting content');
+	});
+});
diff --git a/src/core/todo-transformer.ts b/src/core/todo-transformer.ts
index 05f6fa1..fca4d49 100644
--- a/src/core/todo-transformer.ts
+++ b/src/core/todo-transformer.ts
@@ -137,18 +137,47 @@ export function moveTodoUnderHeadingInFile(
 	return moveTodoWithChildren(content, todoLineNumber, childLineNumbers, targetLineNumber);
 }
 
+/**
+ * Adjust indentation of todo lines by a delta (positive = indent, negative = outdent).
+ * Each level is 2 spaces. Will not outdent past zero.
+ */
+export function indentTodoLines(todoLines: string[], indentDelta: number): string[] {
+	if (indentDelta === 0) return [...todoLines];
+
+	const indent = '  '; // 2 spaces per level
+
+	return todoLines.map((line) => {
+		if (indentDelta > 0) {
+			return indent.repeat(indentDelta) + line;
+		} else {
+			// Outdent: remove leading spaces
+			let result = line;
+			for (let i = 0; i < Math.abs(indentDelta); i++) {
+				if (result.startsWith(indent)) {
+					result = result.slice(indent.length);
+				} else if (result.startsWith('\t')) {
+					result = result.slice(1);
+				}
+			}
+			return result;
+		}
+	});
+}
+
 /**
  * Insert a todo line under a specific heading.
  * @param content - The file content
  * @param headingLineNumber - The line number of the heading (0-based)
  * @param todoLine - The todo line to insert
  * @param nextHeadingLineNumber - Optional line number of the next heading (for section boundary)
+ * @param addBlankLine - Whether to add a blank line between the heading and the todo
  */
 export function insertTodoUnderHeading(
 	content: string,
 	headingLineNumber: number,
 	todoLine: string,
-	nextHeadingLineNumber?: number
+	nextHeadingLineNumber?: number,
+	addBlankLine = false
 ): string {
 	const lines = content.split('\n');
 
@@ -156,15 +185,26 @@ export function insertTodoUnderHeading(
 	let insertPosition: number;
 
 	if (nextHeadingLineNumber !== undefined) {
-		// Insert just before the next heading (at the end of this section)
 		insertPosition = nextHeadingLineNumber;
 	} else {
-		// No next heading - insert right after the heading line
 		insertPosition = headingLineNumber + 1;
 	}
 
-	// Insert the todo line
-	lines.splice(insertPosition, 0, todoLine);
+	if (addBlankLine) {
+		// Check if there's already a blank line at the insert position
+		const lineAfterHeading = lines[headingLineNumber + 1];
+		const alreadyHasBlank = lineAfterHeading !== undefined && lineAfterHeading.trim() === '';
+
+		if (alreadyHasBlank) {
+			// Insert after the existing blank line
+			lines.splice(headingLineNumber + 2, 0, todoLine);
+		} else {
+			// Insert blank line + todo
+			lines.splice(insertPosition, 0, '', todoLine);
+		}
+	} else {
+		lines.splice(insertPosition, 0, todoLine);
+	}
 
 	return lines.join('\n');
 }
diff --git a/src/modals/heading-select-modal.ts b/src/modals/heading-select-modal.ts
index 3eefdcd..6f256bd 100644
--- a/src/modals/heading-select-modal.ts
+++ b/src/modals/heading-select-modal.ts
@@ -79,7 +79,8 @@ export class HeadingSelectModal extends FuzzySuggestModal<HeadingOption> {
 					content,
 					selectedHeading.position.start.line,
 					todoLine,
-					nextHeadingLine
+					nextHeadingLine,
+					true
 				);
 			});
 		} else {
diff --git a/src/modals/note-select-modal.ts b/src/modals/note-select-modal.ts
index dfe1cbf..6497d14 100644
--- a/src/modals/note-select-modal.ts
+++ b/src/modals/note-select-modal.ts
@@ -54,7 +54,7 @@ export class NoteSelectModal extends FuzzySuggestModal<TFile> {
 		if (headingLineNumber !== undefined) {
 			const { insertTodoUnderHeading } = await import('../core/todo-transformer');
 			await this.app.vault.process(targetFile, (content) => {
-				return insertTodoUnderHeading(content, headingLineNumber, todoLine, nextHeadingLineNumber);
+				return insertTodoUnderHeading(content, headingLineNumber, todoLine, nextHeadingLineNumber, true);
 			});
 		} else {
 			await this.app.vault.process(targetFile, (content) => {
diff --git a/src/views/todo-item-component.ts b/src/views/todo-item-component.ts
index 9ff3049..ead53d8 100644
--- a/src/views/todo-item-component.ts
+++ b/src/views/todo-item-component.ts
@@ -4,6 +4,7 @@ import type { TodoItem } from '../core/types';
 export interface TodoItemCallbacks {
 	onToggle: (todo: TodoItem) => void;
 	onMoveClick: (todo: TodoItem) => void;
+	onClick: (todo: TodoItem) => void;
 	onDragStart: (evt: DragEvent, todo: TodoItem) => void;
 	onDragEnd: (evt: DragEvent) => void;
 }
@@ -40,12 +41,16 @@ export function createTodoItemEl(
 		callbacks.onToggle(todo);
 	});
 
-	// Text content
+	// Text content — click to navigate to editor
 	const textEl = itemEl.createEl('span', { cls: 'todo-tracker-item-text' });
 	textEl.setText(todo.text);
 	if (todo.completed) {
 		textEl.addClass('todo-tracker-item-completed');
 	}
+	textEl.addEventListener('click', (evt) => {
+		evt.stopPropagation();
+		callbacks.onClick(todo);
+	});
 
 	// Right-click context menu
 	itemEl.addEventListener('contextmenu', (evt) => {
@@ -65,12 +70,14 @@ export function createTodoItemEl(
 		menu.showAtMouseEvent(evt);
 	});
 
-	// Drag events
+	// Drag events — stopPropagation so nested children don't bubble to parent
 	itemEl.addEventListener('dragstart', (evt) => {
+		evt.stopPropagation();
 		callbacks.onDragStart(evt, todo);
 	});
 
 	itemEl.addEventListener('dragend', (evt) => {
+		evt.stopPropagation();
 		callbacks.onDragEnd(evt);
 	});
 
diff --git a/src/views/todo-sidebar-view.ts b/src/views/todo-sidebar-view.ts
index 4180c5a..9810441 100644
--- a/src/views/todo-sidebar-view.ts
+++ b/src/views/todo-sidebar-view.ts
@@ -1,7 +1,7 @@
 import { ItemView, Keymap, Platform, TFile, WorkspaceLeaf } from 'obsidian';
 import type { TodoItem, TodoGroup } from '../core/types';
 import { parseTodosGroupedByHeading } from '../core/todo-parser';
-import { toggleTodo, moveTodoWithChildren, moveTodoUnderHeadingInFile } from '../core/todo-transformer';
+import { toggleTodo, moveTodoWithChildren, moveTodoUnderHeadingInFile, indentTodoLines } from '../core/todo-transformer';
 import { createTodoItemEl, collectChildLineNumbers } from './todo-item-component';
 
 export const TODO_VIEW_TYPE = 'todo-tracker-view';
@@ -132,10 +132,7 @@ export class TodoSidebarView extends ItemView {
 			this.setupGroupDropZone(groupEl, group, file);
 		}
 
-		// Set initial focus index (Bug 1 fix: don't call container.focus())
-		if (this.flatTodoList.length > 0 && this.focusedIndex === -1) {
-			this.focusedIndex = 0;
-		}
+		// Don't auto-focus — user activates via ArrowDown (like Outline view)
 		// Clamp focus index if list shrank
 		if (this.focusedIndex >= this.flatTodoList.length) {
 			this.focusedIndex = Math.max(0, this.flatTodoList.length - 1);
@@ -152,6 +149,7 @@ export class TodoSidebarView extends ItemView {
 		const itemEl = createTodoItemEl(container, todo, {
 			onToggle: (t) => this.handleToggle(file, t),
 			onMoveClick: (t) => this.handleMoveClick(t, file),
+			onClick: (t) => this.openTodoInEditor(file, t),
 			onDragStart: (evt, t) => this.handleDragStart(evt, t),
 			onDragEnd: (evt) => this.handleDragEnd(evt),
 		});
@@ -215,12 +213,23 @@ export class TodoSidebarView extends ItemView {
 		this.contentEl.querySelectorAll('.todo-tracker-drag-over').forEach((el) => {
 			el.classList.remove('todo-tracker-drag-over');
 		});
-		this.contentEl.querySelectorAll('.todo-tracker-drop-above, .todo-tracker-drop-below').forEach((el) => {
+		this.contentEl.querySelectorAll('.todo-tracker-drop-above, .todo-tracker-drop-below, .todo-tracker-drop-nest').forEach((el) => {
 			el.classList.remove('todo-tracker-drop-above');
 			el.classList.remove('todo-tracker-drop-below');
+			el.classList.remove('todo-tracker-drop-nest');
 		});
 	}
 
+	private getDropZone(evt: DragEvent, itemEl: HTMLElement): 'above' | 'nest' | 'below' {
+		const rect = itemEl.getBoundingClientRect();
+		const relativeY = evt.clientY - rect.top;
+		const thirdHeight = rect.height / 3;
+
+		if (relativeY < thirdHeight) return 'above';
+		if (relativeY < thirdHeight * 2) return 'nest';
+		return 'below';
+	}
+
 	private setupItemDropZone(itemEl: HTMLElement, targetTodo: TodoItem, file: TFile): void {
 		itemEl.addEventListener('dragover', (evt) => {
 			if (!this.draggedTodo || this.draggedTodo.lineNumber === targetTodo.lineNumber) return;
@@ -229,36 +238,39 @@ export class TodoSidebarView extends ItemView {
 				evt.dataTransfer.dropEffect = 'move';
 			}
 
-			// Determine drop position (above or below)
-			const rect = itemEl.getBoundingClientRect();
-			const midY = rect.top + rect.height / 2;
-			const isAbove = evt.clientY < midY;
+			const zone = this.getDropZone(evt, itemEl);
 
 			itemEl.removeClass('todo-tracker-drop-above');
 			itemEl.removeClass('todo-tracker-drop-below');
-			itemEl.addClass(isAbove ? 'todo-tracker-drop-above' : 'todo-tracker-drop-below');
+			itemEl.removeClass('todo-tracker-drop-nest');
+
+			if (zone === 'above') itemEl.addClass('todo-tracker-drop-above');
+			else if (zone === 'below') itemEl.addClass('todo-tracker-drop-below');
+			else itemEl.addClass('todo-tracker-drop-nest');
 		});
 
 		itemEl.addEventListener('dragleave', () => {
 			itemEl.removeClass('todo-tracker-drop-above');
 			itemEl.removeClass('todo-tracker-drop-below');
+			itemEl.removeClass('todo-tracker-drop-nest');
 		});
 
 		itemEl.addEventListener('drop', (evt) => {
 			evt.preventDefault();
 			itemEl.removeClass('todo-tracker-drop-above');
 			itemEl.removeClass('todo-tracker-drop-below');
+			itemEl.removeClass('todo-tracker-drop-nest');
 
 			if (!this.draggedTodo || !file) return;
 
-			const rect = itemEl.getBoundingClientRect();
-			const midY = rect.top + rect.height / 2;
-			const isAbove = evt.clientY < midY;
+			const zone = this.getDropZone(evt, itemEl);
 
-			// Calculate target line: insert before or after the target todo
-			const targetLine = isAbove ? targetTodo.lineNumber : targetTodo.lineNumber + 1;
-
-			this.performMove(file, targetLine);
+			if (zone === 'nest') {
+				this.performNest(file, targetTodo);
+			} else {
+				const targetLine = zone === 'above' ? targetTodo.lineNumber : targetTodo.lineNumber + 1;
+				this.performMove(file, targetLine);
+			}
 		});
 	}
 
@@ -319,6 +331,55 @@ export class TodoSidebarView extends ItemView {
 		this.draggedChildLines = [];
 	}
 
+	private async performNest(file: TFile, targetTodo: TodoItem): Promise<void> {
+		if (!this.draggedTodo) return;
+
+		const todoLine = this.draggedTodo.lineNumber;
+		const childLines = this.draggedChildLines;
+		const targetIndent = targetTodo.indentLevel;
+
+		await this.app.vault.process(file, (content) => {
+			const lines = content.split('\n');
+			const allLineNumbers = [todoLine, ...childLines].sort((a, b) => a - b);
+
+			// Extract lines to move
+			const movedLines = allLineNumbers.map((ln) => lines[ln]!);
+
+			// Calculate indent delta: we want dragged todo to be one level deeper than target
+			const draggedIndent = this.draggedTodo!.indentLevel;
+			const indentDelta = targetIndent + 1 - draggedIndent;
+
+			// Adjust indentation
+			const indentedLines = indentTodoLines(movedLines, indentDelta);
+
+			// Find insert position: right after target todo and its existing children
+			const targetChildLines = collectChildLineNumbers(targetTodo);
+			const allTargetLines = [targetTodo.lineNumber, ...targetChildLines];
+			const insertAfter = Math.max(...allTargetLines);
+
+			// Remove original lines (in reverse to preserve indices)
+			for (let i = allLineNumbers.length - 1; i >= 0; i--) {
+				lines.splice(allLineNumbers[i]!, 1);
+			}
+
+			// Adjust insert position for removed lines
+			let adjustedInsert = insertAfter;
+			for (const ln of allLineNumbers) {
+				if (ln <= insertAfter) {
+					adjustedInsert--;
+				}
+			}
+
+			// Insert indented lines after the target
+			lines.splice(adjustedInsert + 1, 0, ...indentedLines);
+
+			return lines.join('\n');
+		});
+
+		this.draggedTodo = null;
+		this.draggedChildLines = [];
+	}
+
 	private async performMoveUnderHeading(
 		file: TFile,
 		headingLine: number,
@@ -345,11 +406,21 @@ export class TodoSidebarView extends ItemView {
 		switch (evt.key) {
 			case 'ArrowDown':
 				evt.preventDefault();
-				this.moveFocus(1);
+				if (this.focusedIndex === -1) {
+					this.focusedIndex = 0;
+					this.updateFocusVisual();
+				} else {
+					this.moveFocus(1);
+				}
 				break;
 			case 'ArrowUp':
 				evt.preventDefault();
-				this.moveFocus(-1);
+				if (this.focusedIndex === -1) {
+					this.focusedIndex = 0;
+					this.updateFocusVisual();
+				} else {
+					this.moveFocus(-1);
+				}
 				break;
 			case 'Enter':
 				evt.preventDefault();
@@ -462,13 +533,15 @@ export class TodoSidebarView extends ItemView {
 	private openFocusedTodoInEditor(file: TFile): void {
 		const entry = this.flatTodoList[this.focusedIndex];
 		if (!entry) return;
+		this.openTodoInEditor(file, entry.todo);
+	}
 
-		// Open the file and scroll to the line
+	private openTodoInEditor(file: TFile, todo: TodoItem): void {
 		const leaf = this.app.workspace.getLeaf(false);
 		leaf.openFile(file).then(() => {
 			const editor = this.app.workspace.activeEditor?.editor;
 			if (editor) {
-				const line = entry.todo.lineNumber;
+				const line = todo.lineNumber;
 				editor.setCursor({ line, ch: 0 });
 				editor.scrollIntoView({ from: { line, ch: 0 }, to: { line, ch: 0 } }, true);
 			}
diff --git a/styles.css b/styles.css
index 43a38cc..4561b77 100644
--- a/styles.css
+++ b/styles.css
@@ -103,6 +103,12 @@
 	border-bottom: 2px solid var(--interactive-accent);
 }
 
+.todo-tracker-drop-nest {
+	outline: 2px solid var(--interactive-accent);
+	outline-offset: -2px;
+	background-color: var(--background-modifier-hover);
+}
+
 .todo-tracker-drag-over {
 	background-color: var(--background-modifier-hover);
 }