Error in undo/redo of file operation in Windows Vista

This bug just lost me 20 pictures of my new born daughter... Grr.

To recreate:

1) open notepad, write 'test1' and save the file as 'test.txt' in a newly
created folder.
2) change the text to 'test2' and save the file in the parent folder of the
folder you just created - use the 'test.txt' as the file name again.
3) Open the parent folder in a window.
4) Drag 'test.txt' into the newly created folder.
5) Vista comes up with a prompt, choose the 3rd option (Move, but rename to
test (2).txt)
6) Press undo (ctrl+z)
7) Press redo (ctrl+y)
8) The first file called 'test.txt' is now overwritten by the second file -
WITHOUT any prompt from Vista.

Mkkl.