Hi
I found a solution to this that means you don't have to put in conditions\scopes on whether the file is already there
Not sure if this a recommended long term best practice, but it works.
I also had old flows that did overwrite the file in SharePoint, but as above new 'Create file' does not allow it.
So I looked at one of the Microsoft Automate templates 'Copy new files from PC to SharePoint'
I copied to clipboard the 'Create file' action from that template into the flow I was having problems with, cleared existing fields in it action and replaced them with my own and it worked, it overwrote the files.
I suspect you could also copy from an old flow that worked in the same way.
So from this I gather when Microsoft make changes to these actions they make it so it only applies if you are adding the 'action' from new. So if it worked on an older flow, then copy that action from the older flow and you should have the old situation.
Not sure if this issue is a bug on new action or intentional from Microsoft.
Give a thumbs up if this works for you, as it cost me a lot of time trying to get a workaround in place when the solution , in the end , was very simple and hidden in plain sight!
BTW: Versioning is turned on in my site, so solution is not there