"Is this symptom still reproducible in 8.10 RC or later?"

Yes, there does not seem to be any detection code in 8.10.

To reproduce, you have to have a separate /home folder with 'documents',
'photos', etc. pre-made, then install Ubuntu 8.10 and you will see that
Ubuntu created 'Documents', 'Photos', etc., disregarding my current
folders of the same name, with different casing.

-- 
New 'Documents', 'Pictures', etc. folders ignore current folders of the 
same/similar name
https://bugs.launchpad.net/bugs/138924
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