If the input is something like this:
text="First line\n\n** Point 1\n* Point2\nLast line"
print textile.textile_restricted(text)
The output looks like this:
<p>First line</p>
<p> <ul>
<li>Point 1</li>
</ul></li>
<ul>
<li>Point2</li>
</ul><br />Last line</p>
Its the same for #, - and *. The behavior is the same for two or any more repeating.