[c-nsp] Does traffic routing through a PE get an MPLS label added/removed?

[TiM]

Hi,

In a recent meeting with our Cisco SE, he told me something that doesn't
seem right to me.  I'm having trouble finding documentation to support
either side though.
Given the following diagram (apologies to console people) -
http://tinyurl.com/cisco-mpls
It's my understanding that traffic leaving Site 4 and heading to Site 1
will route locally through the VRF and not have any MPLS header(s)
added/removed as it routes through PE1.  (Please assume that all sites are
in the _same_ VRF, I realise this Cisco diagram is trying to show two
seperate VRFs.  That's my problem, I can find no real Cisco discussion of
multiple interfaces terminating on the same PE in the same VRF.)

Our Cisco SE says that even routing locally on PE1 from Site 4 to Site 1,
ingress traffic will have an MPLS header added, it will then be routed,
then the MPLS label popped off again and it'll egress towards Site 4. 
This seems wrong to me, I think it must just be a IPv4 fowarding decision.
 Only if traffic was egressing towards Site 3 or Site 2 would it have (2)
MPLS headers attached.

Can anyone point me to Documentation that would answer this question?

I'm sure that ingress traffic is assigned some internal "you're in VRF x"
label, but our SE was clear in stating it would be an MPLS header added
and removed, the same information as if it was egressing towards Site 2/3.

Thanks!

Tim