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5.3.0 on 4.11M1. If a file has been staged and then edited, the staging view shows a copy in both unstaged and staged panes; good. If the unstaged file is "Replace with Head"ed, the staged file is discarded and then the unstaged file is replaced with head. This discard of a staged file is an unauthorized discard of user input => MAJOR. A consistent, but not very useful action would be to replace the unstaged with head just as the menu suggests, leaving the staged unaffected. Much more useful would be, Bug 442146, just/also "Replace with Staged".
The command even warns the user that changes will be lost. We could maybe improve the wording of that warning. It currently says "will discard all local changes"; we could say "will discard all uncommitted changes".
New Gerrit change created: https://git.eclipse.org/r/135839
Gerrit change https://git.eclipse.org/r/135839 was merged to [master]. Commit: http://git.eclipse.org/c/egit/egit.git/commit/?id=629f3ef687f0fc5df81c2a7239aac325b0fdc1c5
Warning text updated as proposed in comment 1. I'm not going to change the behavior of the operation; it does what git checkout HEAD -- <files> does on the command-line.