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Description
Both the file and directory seem to end up in the vfs and they're both visible in the Data tab.
Executables will see one or the other depending on how they walk the filesystem. Notepad always sees the file, regardless of the mod priority. Same thing for Explorer++ unless the directory is in overwrite, in which case it sees that.
The conflicts are also not shown properly, I guess because directories are never considered: the mod info dialog doesn't show the conflict and the conflict icon is not visible in the mod list.