I found this bug (I think):

// create an object with an embedded set of objects
db.example.insert({_id:1,set:[

{key1:'v1'}

]});

// now updated key1 in set and add an embedded object
// the relevant objects are separate from each other so it should work
db.example.update({_id:1}, { $set : { 'set.0.key1' : 'v2', 'new.key' : 'bla' }});

// however it doesn't
db.getPrevError()
"

{"err" : "Modifier spec implies existence of an encapsulating object with a name that already represents a non-object, or is referenced in another $set clause" , "n" : 0 , "nPrev" : 1 , "ok" : 1}

"

// doing the updates separate from each other does work:
> db.example.update({_id:1},{$set: { 'set.0.key1' : 'v3' }});
> db.example.update({_id:1},{$set: { 'new.key' : 2 }});
> db.example.find()
{"_id" : 1 , "set" : [

{"key1" : "v3"}

] , "new" : {"key" : 2}}

I guess, somehow it is not possible to use $set to create a new embedded object while at the same time updating an existing embedded object.