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We are implementing SharePoint Online (Office 365). We are finding that changes made to a document (open in Word Online) save as a new document by the same name rather than updating the existing document. I have tried enabling and disabling versioning, makes no difference.

duplicate Railroad Medicare

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Both your documents don't have the same icon. I suspect they don't have the same format: one may be .doc, and the other .docx.
Maybe you uploaded a .doc, and Word Online saved it back as .docx. Hence you have two documents that seem only to have the same name, but actually differ by their extensions.

Two files with the exact same URL is definitely not possible in SharePoint.

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When you save as a new document, have you selected “replace existing file”?

If you do not select the option, it will create another file in the same library. You could select the option to check if the same issue will occur.

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The new document was saved in an updated format, therefore it is saved as a new document. If you users which to maintain the versioning, they would need to save the changes in the old format. The only way to do that is to edit in the on-prem version of Word. Word Online automatically saves in the latest format.

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