To reproduce this:
- Create a folder on your Desktop named 'test.'
- Create a file in that folder also named 'test.'
- Move the file from the folder onto your Desktop.
- Click 'Replace.'
Do the same sequence, except choose 'Keep Both Files.' Same result.
[crarko adds: Okay, this one half worked when I tried it in 10.7.3. With 'Replace,' both file and folder were indeed deleted. I also tried it with other items remaining inside the folder, and in that case everything inside the folder was also deleted. A potential disaster.
In the 'Keep Both Files' case, the folder was untouched and the file was renamed to 'test copy' when I moved it and 'test 2' when I copied it.
In any event, it's worth knowing that some potentially dangerous behavior is present in this function so there are no nasty surprises.]

