Is it just me or should the bullets and numbers of the lists be indented?
I don't think this would work very well if you have multiple levels of bullets.
Nonsense. There are many situations where 2 or even more levels of hierarchy are exactly what you want. Screwing up such a common need in favor to a questionable typographic preference is not a good idea.
And yes, in theory you can "fake" the hierarchy with headlines. In practice that tends to look rather odd and make it hard to actually recognize the hierarchy. Especially in a whitespace-heavy stylesheet like this one.