I want to for example paste bass note 1 on top of bass note 3 overwriting bass note 3 so I don't hear both.   I know I could pre-delete note 3, but I'm thinking there must be a way to avoid that step?

Hi. What you're missing is Ctrl+Alt+V and this:

Ctrl+Alt+V  appears to not be working.  Even with "Replace Old with New" set,  I still hear the bass note I'm trying to overwrite. 

Are you working in the Piano Roll view or Track view? In the Track view, are the two (overlapping) clips in the same track or different tracks?

I'm in track view.  There is only 1 clip (audio).
 
I think I figured it out.  It appears you must have the take lane open. 
So basically: 
Pasting with the take lane minimized = new and old recording audible.
Pasting with take lane minimized = only new audio audible.
In both cases pasting was done on the track (not the take lane).
 
Is this a bug in X3?  I would prefer to keep the take lanes minimized and still have this ability to copy paste-overwrite.

I've just run a quick test (using the Normal project template and audio clips) and, whether take lanes are expanded or not, the copy paste-overwrite works fine here. 

That's strange.  I just tried the same thing (Normal project template and audio clips) and still get the old audio behind the new audio when the take lanes are minimized.

Interesting. I ran a test again, using both ordinary audio clips and groove clips, with lanes collapsed, but it works fine here (although it showed a strange behavior a few times, which I can't reproduce anymore).