It could be that they're basing precedence on the line of succession to a degree. Both Princes William and Harry will inherit before the Duke of York or Earl of Wessex, thus it makes sense why they might be given precedence over them. The Queen has long seemed to take more of an interest in them, especially Prince William, owing to his destiny, so to speak, so perhaps she has elevated them?
I read somewhere recently that the Duchess of Cambridge's precedence has been set to below that of all Princesses by birthright (including Princess Alexandra) when she is alone, but equal to her husband's when she is with the Duke of Cambridge. Is there any legitimacy to this, or is it just a tabloid rumour set to make the Queen look line a grouch and the Duchess like a commoner?
You may be right: while it has always been clearly stated that precedence is not based on and doesn't follow the Line of Succession, that may be changing. After all, one's place in the Order of Precedence is entirely at Sovereign's will.
Again, there is a difference between Official and Private Order of Precedence. The Queen's decree that Princesses by marriage should have lower precedence that Princesses by birth is only about the Private Order and didn't affect Kate's (or anyone else's) position in the Official Order of Precedence.
The general consensus is that Princesses of the same (more or less) generation are meant. Thus, the Duchess of Cornwall is the second woman in the Kingdom after the Queen in the Official Order, but comes after Princess Anne and Princess Alexandra (Princesses by birth of the older generation) in the Private Order. The Duchess of Cambridge is the fourth woman in the Kingdom in the Official Order (after the Queen, the Duchess of Cornwall and the Countess of Wessex) but 8th in the Private Order (after the Queen, Princess Anne, Princess Alexandra, the Duchess of Cornwall, the Countess of Wessex, Princess Beatrice and Princess Eugenie).
However, when Prince William is present, Kate takes her ranking from him. It would appear that in the Private Order for Men (if one does exist), William actually has higher precedence that his uncles, which means Kate's precedence would be lower than only that of the Queen and Camilla but higher than Sophie's and all the Princesses by birth.
I should add that while understanding the Official Order of Precedence is fairly easy and I am quite certain of everything I wrote, the Private Order may sometimes be interpreted differently. This is my personal point of view (based on observation and the scarce information that exists), and others may agree or disagree with it. And one more thing: unless we are talking about state or very official events, the precedence and ranking business is a fairly relaxed affair. Royals don't go around curtseying to each other based on precedence.