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I think it is by design:
1) Your original .LIT stays where it was, in case you need the original source material.
2) The new .LIT file gets all the metadata/changes you might make, plus is there for those of us with multiple devices who want one central repository for up-to-date versions of the book-for example, I convert everything to .ePub for my iPhone, and .LRF for my Sony.
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