In your video, the template is opened as Document8 without showing the extension.
That is clearly not going to overwrite the template on save.
You say that default "New" behavior has worked that way for years. My god, that is the point of this second generation thread. It does NOT work that way on my machine.
Are you telling me that if I double-click a .dotm on my machine, it will open in "New" mode, or that I can right-click and select NEW?
As I've said several times already, on the laptop, the "New" option is NOT in the context (right-click) menu. The only option is "Edit."