I didn't answer your question "Is this what is meant to happen?", because I don't know the answer, and I've been waiting for BG Support to say something, but they haven't. And it has now been about three or four weeks since you raised the question, so I doubt they're going to.
I agree that it sounds like a waste of hard work to wipe out all the information that was already transcribed. Even more so if someone has gone to the trouble of entering a lot of other detail against the transcribed record (Personal History, links to other family members, and so on). Presumably all that information will be wiped.
I suggest you try to attract BG Support's attention by raising this question again, but this time in the Bugs and Fixes section of this forum. BG Support seem to be fairly under-resourced and I suspect they don't read most of the questions in this forum, but they do seem to monitor the Bugs and Fixes section fairly closely. There's still no guarantee you'll get a reply from them, but your chances are probably better than here. Better still if you can provide proof of what is happening, via screenshots and/or step-by-step instructions to help them recreate the problem. If you can't prove that it's a problem, then they can't fix it, in which case you may not even get a reply from them.