It should ask you if you want to replace the existing songs in your library, or if you want to have a duplicate, or if you don't want to download them again, I believe. The goes the same way with importing from CD's.
Yes you have to buy it again and yes it duplicates in your library. I asked Apple about that the first day that iTMS was out. If you check you this thread one of the features that I mentioned was for iTMS to be smart preventing duplicates and giving a discount on an album you buy if you have already bought a single or two.
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I just found out that I can't transport music from my iPod to another powerbook; that's kinda bad...must be some kind of prevention method...
cheers,