While re-reading the Genetic Power section in the FAQ, after I saw a guide relating to this, I happened upon a odd rule: Rule 4, and the first example

One of my pets, Nameless, has a GP of 2, even though her father is a GP0, which shouldn't be possible with this rule, as she'll only get a +1 from the level.

Is my pet bugged, thus I should report it; or is it GP2 due to Rule 5, or another rule, giving it another +1?

This was also in there, assuming both parents were level 50 when the baby was born.

1. Lvl 50 pet GP grade 1 x Lvl 50 pet = Child GP Grade 2 (if there are 7 or more dominant genes from parent with Grade 1) or Grade 1 (if there are less than 7 dominant genes from parent with Grade 1)

Your pet was GP3, so I don't know if that changes anything.

EDIT: Looking back on this, it says if it was seven or less genes inherited from the GP, it would get one less grade, so this does work. Your pet recieved less than seven genes from the GP3 mother, so it only was GP2

it could work if the rule it used was Rule 3, the example you showed:

1. If parents have a difference of 1 grade of Genetic Power, the child will get the higher grade if it has inherited 7 or more dominant genes from the parent with higher grade. Genetic Power through level can be only acquired but not inherited in this case, thus the levels of parents do not play any role here and do not affect the Genetic Power grade of the child until they are both Lvl 50.

But there is suppose to be a block for it, the rule I mentioned: Rule 4.

If parents has a difference of 2 or more grades of Genetic Power, the child won't get Genetic Power grade for parents' genes, it can get only 1 Grade for parents' levels.

Thus It shouldn't as the difference in genes is 2 or higher.

Also, it's 7 or more, but yeah, she shouldn't have gotten the inheriting bonus, as Rule 4 stated.

This pet was born before the bug with GP was fixed. In some cases it appeared that parents with a GP difference of more than 1 grade didn't get their baby's GP reset to 0. In fact this unicorn should have GP 1.

Thank you for the clarification, so it was a bug that has already been fixed.

Anyways, since I'm at it;

1. Would a GP 1 + GP 3 combination result in a GP 0 or 1? From what I can tell, it would be 0, as long as none of them are level 50, due to Rule 4, correct? Or would Rule 2 apply here, and make the pet GP 1?

1b. Like above, would Rule 2 apply if both of them are level 50?

2. Does Rule 5 apply to GP 2 & 3? As it only stated GP 1 pets, I would think not, but would like clarification here.

3. In Example 3: Lvl 50 pet GP Grade 2 x Lvl 50 pet GP Grade 1 = Child GP Grade 2 -- Shouldn't Rule 3 also apply here, as their difference is 1 grade?

1. It would be GP 0 because the difference between parents is more than 1 GP grade. This limit exists in order to avoid skyrocketing of GP from low to high without breeding everything in between. Like in real life, breeding a best in show male to a breedless female won't give a litter of purebred babies.

1b. Two level 50 parents always provide +1 GP grade for their baby unless it's already GP3. 

2. I apologize for not removing Rule 5 from FAQ in time. It's obsolete at this moment. We had simplified GP1 breeding to help the new players when there were few GP pets in game. It was removed later when GP pets became common even in Pound.

3. It should and it does! If GP2 parent is a genetic winner, the child will be GP3. The example doesn't tell all the outcomes here, you're right. Sorry once more, I updated it to reflect that case too.