Adding an element that already exists in the Elements repository should warn the user

If the elements truly are duplicates (on the same page, in the same iframe with the same find attributes) Test Studio will not add it as a duplicate. It will not warn you of this either. It will simply record the new test step and reference the already existing element.

I suspect what's really going on in your case is that Test Studio views the element being recorded is on a new/different page and recording this "duplicate" as a new element on a new page. We do this deliberately because even though the element could be a duplicate, if it's on a different page, we need to be on the safe side and record it as a different element on a different page compared to what's already been recorded.

To prevent this sort of duplication you need to change the page compare mode in the recording options. The default setting is "FullPathAndQuery". If your web application uses query strings heavily and the query strings do not bring up significantly different pages, Test Studio doesn't know this and will record all the elements from what it thinks are "different pages" (having different query strings) as different/unique elements. To us, the intelligent humans, we recognize them as duplicates. Unfortunately Test Studio isn't intelligent enough to know they are truly duplicates as opposed to similar looking elements on different pages of the web application.

When the web application behaves this way (uses query strings only for data and not to load different pages), a better setting is "FullPath". Then Test Studio will ignore the query string when comparing page nodes and will do a much better job automatically merging your elements together. You can also merge your already recorded elements by following this procedure.

If you have any follow up questions to this don't hesitate to ask.

Yes, that includes elements manually added via Add to Project: http://screencast.com/t/gCk4VgBd