Face Down 4-Starred Lady Bug of Doom is Attacked.
FLIP: Destroys all face-up Level 4 monsters on your opponent's side of the field.

The attacking 4-star monster is destroyed. Since his ATK was higher than Ladybug's defense. Is Ladybug also destroyed?

I'm confused about Step 1, Step 2, and the order or resolution?

All level 4 monsters are destroyed. Since the flip effect does not negate the attack, the attack goes through. Thus, damage is calculated.

If the attacking monster has a higher ATK then 4SLDoD's DEF, then 4SLBoD would be destroyed after damage calculation.

Im not the greatest person when it comes to understanding the Damage Step, and I am sure there are better people there that can explain it than I.

The Flip effects take place AFTER Damage Calculations in the damage step, so you have already taken your damage, and your monster is already considered destoryed at this point.

So your monsters dead, but its effect would still take place.

If you read this link, it should answer your questions.

http://lists.upperdeck.com/read/messages?id=1757

Thanks for the upperdeck link. That helps quite a bit. No wonder I was confused . . .