I am using AEM 6.1 SP1. I have got the Touch UI RTE dialog from Link
When i install that package available in the link, I noticed that the nodes under paraformat are not being read at all. If you notice in the dialog, you will see Paragraph, Heading 1, Heading 2, Heading 3. As shown below:
But if you take a look at the nodes that are under paraformat node in the cq-dialog, the nodes descriptions are "This is my Paragraph", "Header 1", "Header 2", "Header 3". I actually even went ahead and deleted these 4 nodes p, h1, h2, h3 under formats. Even after deleting these, the dialog continued to show me [Paragraph, Heading 1, Heading 2, Heading 3] as in image above.
This means the dropdown in the dialog UI is showing stuff from somewhere else.