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The only way that paragraphs that are all formatted with Heading 1 style could be shown with TOC 2 in the TOC -- and this is highly improbable -- is if the TOC entries inside the sections were manually changed to TOC 2. And that change would disappear, returning all the entries to TOC 1, if the TOC was updated (using the "Update entire table" choice in the popup). In fact, it sounds like that's what happened to you.
I'll repeat that the headings inside the sections should be formatted with Heading 2. Then the TOC would appear the way it used to -- with TOC 1 for the section titles and TOC 2 for the other entries -- automatically. If you really want the Heading 2 headings to look the same as the Heading 1 ones, you can modify the definition of the Heading 2 style to match the definition of Heading 1 style (although as a reader I would find that confusing). The only difference between the two styles would then be the value of the Outline Level, which is not visible except in the TOC.