Me again, For the most part Org now honors the file-local value of `indent-tabs-mode' as set in an Org file. When that value is `nil' and a buffer used to edit a source block from that file contains lines that begin with tabs, then those tabs are being replaced with spaces before the text is written back into the Org file.
So far so good. Unfortunately inside the buffer used to edit the source block `indent-tabs-mode' is not disabled when appropriate. That doesn't matter that much since it is just a transient buffer, but it is still distracting. I suggest that you fix that by adding the following at the appropriate place in `org-src--edit-element': (when (= source-tab-width 0) (setq indent-tabs-mode nil)) Thanks, Jonas