Regarding the first issue with the "\u" switch, I have been working on documentation relating to TOCs and have taken a closer look at your issue in the process. I found that the behaviour seen when updating the TOC in your document using Aspose.Words is actually caused by a completely different issue.
To clarify, Aspose.Words will update a TOC with just the heading \o switch and without the "\u" switch properly. After some further investigation I found the behaviour of these switches is actually different and that the Office documentation is a bit misleading.
In MS Word the "\o" switch actually appears to behave in a way which includes any style which has an outline level, not just in-built styles as is commonly assumed. So in other words with that switch MS Word actually builds the TOC from the outline levels of styles, not the actual in built heading styles themselves. You can test this by creating a new style and giving it an outline level under Paragraph options, e.g Level 1. Any paragraphs styled with this will be included in the TOC using the "\o" switch.
The heading styles and outlines levels are still strongly related as the Heading 1 style will always have a Level 1 outline, Heading 2 will have Level 2 etc. These levels cannot be changed for built-in styles.
The "\o" switch is better described as specifying the range of the outline levels to include in the TOC, similar to the "\l" switch when using TC fields. Furthermore the only difference between using the default heading switch "\o" to include all levels and the "\u" is that the first switch will only include all styles with an outline level, whereas the second switch will include all paragraphs with outline levels. i.e. a paragraph styled with a style that has no outline level but the paragraph itself has an outline level defined.
In your attached document the content to be included in the TOC is styled using "Heading 2_0". This is not an in-built heading but however does have the same level outline as the Heading 2 style which means it is picked up by MS Word and included. Aspose.Words currently does not pick this up as it's using the actual in-built heading styles. I have changed the defect description to reflect these findings. We will inform you when this issue and the one regarding bookmarks are resolved