Wow it's been a while. Sorry I dropped this!
To reproduce the bug, open the following content in `emacs -q` and run org-archive-subtree on the TEST ITEM:
#+COMMENT: Local Variables:
#+COMMENT: mode: org
#+COMMENT: org-archive-location: "::datetree/"
#+COMMENT: org-odd-levels-only: t
#+COMMENT: End:
* TEST ITEM
You can check that the indentation of the TEST ITEM is more correct if you set org-odd-levels-only to nil. More weirdness also happens if you set org-archive-location to "::datetree/* Archive Header" (while org-odd-levels-only is t).
Charles