Thanks for your post.
I just did some tinkering and it looks like "replacing" is actually the appropriate behavior in this situation.
Let's say your copy of the database is on revision #5, your repository is on revision #6 (which includes a change to object x), and then you change object x in your database. If the difference between 5 and 6 is different than the difference between 5 and 7 (the change you just made), this will show up as a conflict. If you choose to "Keep Mine" and commit, you're basically telling source control, get rid of whatever version 6 is and put version 7 in there instead. (You'd only see 5 and 7 in the revision history also, because 6 isn't involved in the historical chain.)
Now, if you were to go to a different database that's still on revision 6 and modify object x again (causing a 6-7 vs 6-8 conflict) and select "Keep Mine", you would see "replace" again in the SVN log, and you'd only see 6 and 8 in the revision history.
The only reason I can think that your colleagues would be seeing different behavior is if they weren't in conflict situations.
Please let me know if you have further questions.