Problem:  Navigation panel shows Headings as stand alone paragraphs, but not Headings as in-text formatting.  Note: TOC does reveal it.

Unavoidable issue, because APA 6th edition and other formatting standards require the use of in text level formats. Thus, Heading 3 is used for the first sentence as the heading for the section discussion that follows, but the paragraph formatting is text, not Heading 3. It looks something like this. 

Heading 2

     Heading 3. Blah blah blah, etc.

The Style Inspector finds paragraph formatting as text and text level formatting as Heading 3.  With Heading 2, it shows the paragraph as heading 2 and the text as default.

I assume this is an oversight not covered in the navigation panel as it only looks at the paragraph formatting only or is there a clever trick to reveal in text level formatting?

Which version of Word are you using? In Word 2010 and 2013, if I add a style separator and apply heading styles to the paragraph before and after the separator, both paragraphs show up in the Navigation