Replace and merge

The argument over what should happen when a folder is placed over a folder with the same name seems to be a distillation of the PC vs. Mac debate. As always there is a tendency to reduce the arguments to single points ("don't you know what replace is??") which means that issues lose their context.
Replace would not make sense on a PC. The reason that replace is an option on a Mac is because of the good choice of separating the user properties from the applications. On windows if a replacement of an application folder was done, data would not be lost but configurations and extensions would be.
The use of replace as a method for installing applications also fits in with the Mac philosophy of making drag and drop a universal feature. As a PC user, it seemed to me there was an excessive amount of drag and drop (henceforth "drag) talk with Macs. I hardly ever used drag so it seemed like just another example of Macs choosing a graphical nicety over getting things done. What I neglected to think about was that part of the reason I didn't use drag on the PC was that it was broken. PC drag works so inconsistently that remembering where it works becomes worse than memorizing genders in a foreign language. Not only are we dependent on the application but on the relationship of two applications, their states, and the type of data.
The idea on the Mac is a consistent, easy-to-understand interface for getting things done. Therefore drag can do work that on PC would be drag, program installation and file opening. f these three the drag is the most readily understood because it has a real world equivalence. If we were purchasing the equivalent of an application (a calculator, a clock) we would drag it home from the store, not install it. This means people don't have to be experts to get things done.

I think the ideas of simplicity, consistancy, and a real-world equivalence, are far stronger argument than the language argument ("replace means replace, get it"). What we are dealing with is metaphors. A metaphor is a way of understanding something in terms of something else not an exact equivalence. If above my chair I have a desktop with files that I need to move I would not "cut and paste" them. Nor would I attempt to put a clock or a calculator inside a folder. I might put a directory inside a folder but not the other way around. These ideas do not mean that our computer OS's are faulty they are doing the best they can.
Let's also imagine a scenario. My computer needs more RAM but the two slots are both full. I go to the store and buy a larger module then replace one of the smaller ones in the computer. After I replace the old one it does not disappear from existence. I could go back and replace the new one with it if needed.

Computer metaphors also have to bend to suit computing. Deleting doesn't suggest a trash can but both OS's understand that regardless of the wording this is something that users need. And it is hear where the use of replace leads to both inconsistency and potential problems.
Users come to understand that deleting is difficult to do. On the PC it is Delete-Yes-Empty Trash-Yes. On the Mac it is Apple+Delete, Trash, Yes. Not only are these (basically) four-step processes but we are trained to stop in the middle (for days or months) and two of the steps mention delete.
With replace there is only one step of confirmation which does not mention delete.

Last there is a general design principal that anything users do should have an undo.

By using either undo or the trash can with replace the Mac could allow for user mistakes and be consistent across two fronts.