Weirdness in gdrive

Using Google's web ui (ii.e. drive.googlecom) I moved one directory into another directory where apparently I already had a directory with that name. It seems that it replaced the original directory with the one I moved in.

Is this what people expect to happen? This isn't an rclone issue, so hence in off topic.

Yes, that's expected since Google Drive supports duplicate files/folders which means it only hid the folder instead of replacing it.

Try rclone dedupe (https://rclone.org/commands/rclone_dedupe/). That should help you merge the duplicate folders.