Hi Tim, thank you for posting in the Q&A forum.
I can reproduce this behavior in my SharePoint Online environment.
When I open the newly uploaded document via the URL (https://<tenant>.sharepoint.com/sites/Site/Shared%20Documents/Folder/doc.docx), it opens the old document with a warning message in the client: “A newer version of this file is available on the server”.
Then I click on “Discard Changes”, it displays the new document instead. After that, if I open the document via the URL again, this issue no longer exists.
This scenario is possibly caused by a conflict of version in the Word client. When you open the copy from local drive to make changes, the client saves an earlier version to the local cache, which is loading the original document since you are using the same name for the newly uploaded document.
I have not been able to find a solution to prevent this issue from happening. I would suggest you modify the document directly from SharePoint instead of reuploading a copy from local drive with the same file name.
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