Direct speech: Jane said, "I dropped my harmonica when I was swinging with Tarzan."
Reported speech: Jane said that she had dropped her harmonica when she was swinging with Tarzan.
This reported speech sounds correct to my ears. I understand the action in the clause in red to have taken place at the same time as the action in the clause in blue. (Or more accurately, that the action in blue happened during the action in red.)
Someone has asked whether the red clause should or could be when she had been swinging with Tarzan: Jane said that she had dropped her harmonica when she had been swinging with Tarzan.
This doesn't sound right to my ears. It sounds like the swinging took place before, not at the same time as the drop of the harmonica.
I haven't been able to find any reference work that addresses this. Is my native intuition correct? But I'd like a reference to support the response either way. Does anyone have anything on this?