Actually, I'm pretty sure that rename follows the convention of *nix rename(2) in overwriting the destination if it exists atomically (meaning that no other process will see the destination cease to exist, even for an instant). This is useful because it allows you to build a file as a temp file, then rename it to where you want it to be, and nobody sees the file when it's half done.
Probably rename($old, $new) with an existing new was caused by permission problems. I bet the other problems you had were the result of not calling clearstatcache(), which can cause PHP to act like a file exists though it has since been deleted.
