diff --git a/.cursor/plans/fix_stem-level_dedup_8fa9a015.plan.md b/.cursor/plans/fix_stem-level_dedup_8fa9a015.plan.md
new file mode 100644
index 00000000..545cbf80
--- /dev/null
+++ b/.cursor/plans/fix_stem-level_dedup_8fa9a015.plan.md
@@ -0,0 +1,124 @@
+---
+name: Fix stem-level dedup
+overview: "Fix the real defect where deduplicate_name compares bare slugs against full filenames (with extensions), making it blind to file-format collisions. The fix: return the dedup key (bare slug) from name_for_inst so callers never touch extensions, and seed from tree children's slugified names instead of disk filenames."
+todos:
+  - id: return-dedup-key
+    content: Change name_for_inst to return (filename, needs_meta, dedup_key) — the bare slug that goes into taken_names
+    status: completed
+  - id: fix-dir
+    content: "dir.rs: remove disk seeding, insert dedup_key (not filename) into taken_names"
+    status: completed
+  - id: fix-project
+    content: "project.rs: seed from slugified old-tree children, insert dedup_key into taken_names"
+    status: completed
+  - id: fix-api
+    content: "api.rs: seed taken_names from tree siblings' slugified names instead of fs::read_dir"
+    status: completed
+  - id: fix-tests
+    content: Update file_names.rs and api.rs tests to assert correct file-format dedup
+    status: in_progress
+isProject: false
+---
+
+# Fix dedup key propagation (no extension awareness outside file_names.rs)
+
+## The Defect
+
+`deduplicate_name` compares bare slugs against `taken_names`. But callers populate `taken_names` from filesystem entries (`vfs.read_dir` / `fs::read_dir`), which have extensions. Bare slug `"helper"` does not match `"helper.luau"`, so file-format collisions go undetected.
+
+```mermaid
+sequenceDiagram
+    participant Caller as dir.rs / api.rs
+    participant NFI as name_for_inst
+    participant Dedup as deduplicate_name
+
+    Caller->>Caller: seed taken = {"helper.luau"} from disk
+    Caller->>NFI: name_for_inst("Helper", taken)
+    NFI->>NFI: slug = "Helper"
+    NFI->>Dedup: deduplicate_name("Helper", {"helper.luau"})
+    Dedup-->>NFI: "Helper" (no match!)
+    NFI-->>Caller: "Helper.luau"
+    Caller->>Caller: OVERWRITES existing Helper.luau
+```
+
+## Root Cause
+
+The callers violate the `taken_names` contract. Per the original plan: `taken_names` should contain **claimed names** (bare slugs), not filenames with extensions. The defect is in what goes INTO the set, not in `deduplicate_name` itself.
+
+## The Fix (zero extension awareness outside file_names.rs)
+
+Two changes, both inside the existing architecture:
+
+### 1. `name_for_inst` returns the dedup key
+
+`name_for_inst` already computes the bare slug (`deduped`) internally. For file middleware, it appends the extension AFTER dedup to produce the filename. We expose the pre-extension slug as a third return value so callers can insert it into `taken_names`.
+
+```
+Current:  (filename, needs_meta)
+Proposed: (filename, needs_meta, dedup_key)
+```
+
+- **Old inst path:** `dedup_key` = the slug portion of the existing filename. `name_for_inst` already receives `middleware`, so it can strip `extension_for_middleware(middleware)` from the filename. This is not "extension stripping scattered around" -- it is inside the one function that owns extension logic, using `extension_for_middleware` which already exists.
+- **New Dir inst:** `dedup_key` = `deduped` (same as filename, no extension)
+- **New File inst:** `dedup_key` = `deduped` (the slug before `.{extension}` was appended)
+
+Callers insert `dedup_key.to_lowercase()` into `taken_names`. They never see or touch an extension.
+
+### 2. Replace disk seeding with tree-based seeding
+
+Instead of reading filenames from disk (which contain extensions), seed `taken_names` from the **existing tree's children** by slugifying their instance names:
+
+```rust
+// Seed from old tree children's slugified instance names
+for child_ref in parent.children() {
+    let child = get_instance(child_ref);
+    let slug = if name_needs_slugify(&child.name) {
+        slugify_name(&child.name).to_lowercase()
+    } else {
+        child.name.to_lowercase()
+    };
+    taken_names.insert(slug);
+}
+```
+
+This is architecturally correct -- instance names are the authoritative source, and slugifying them produces the same bare slugs that `name_for_inst` would produce. No filesystem reads, no extensions, no parsing.
+
+**What about orphaned files?** Files on disk that are not in the tree (manually added, from other tools) will not be in `taken_names`. A new instance could overwrite them. This is acceptable -- those files are not part of Rojo's model. The old `encode_path_name` system had the same behavior, and upstream PR #1187 does not do disk seeding either.
+
+## Affected Files
+
+### [src/syncback/file_names.rs](src/syncback/file_names.rs)
+
+- Change `name_for_inst` return type to include `dedup_key: String`
+- Old inst path: derive `dedup_key` by stripping `.{extension_for_middleware(middleware)}` suffix from the filename (single strip, inside the function that already owns extensions)
+- New inst paths: `dedup_key` = the `deduped` variable (already computed, just return it)
+
+### [src/syncback/snapshot.rs](src/syncback/snapshot.rs)
+
+- `with_joined_path` and `with_base_path` call `name_for_inst` and return the result. Update them to propagate the `dedup_key` so callers in dir.rs/project.rs can use it.
+
+### [src/snapshot_middleware/dir.rs](src/snapshot_middleware/dir.rs)
+
+- Remove `vfs.read_dir` seeding entirely
+- The loop already processes old+new children interleaved; old children go through `name_for_inst`'s old-inst path, which returns the dedup_key. Accumulate `dedup_key` instead of `file_name()`
+- New children's dedup_keys are also accumulated
+
+### [src/snapshot_middleware/project.rs](src/snapshot_middleware/project.rs)
+
+- Remove `vfs.read_dir` seeding in `or_insert_with`
+- Accumulate `dedup_key` from `with_base_path` results instead of `file_name()`
+
+### [src/web/api.rs](src/web/api.rs)
+
+- Replace `fs::read_dir` seeding with tree-sibling slugified names
+- `parent_instance.children()` gives child refs, `tree.get_instance(ref)` gives instance names, slugify them into `taken_names`
+
+### Tests
+
+- Fix the "limitation documentation" tests to assert correct dedup behavior for file-format instances
+- The nightmare tests that use `process_new_children_with_disk_seed` switch to tree-style seeding with bare slugs
+- The `twoway_sync_dedup` tests test file-format collisions properly
+
+## Edge Case: Old inst with unknown middleware
+
+For old instances, `name_for_inst` receives `middleware` as a parameter (determined by `get_best_middleware`). It uses `extension_for_middleware(middleware)` to derive the dedup_key. For Dir middleware, extension is empty, so dedup_key = filename. For all file middleware, the extension is known and strippable. There is no "unknown extension" case.
diff --git a/src/snapshot_middleware/dir.rs b/src/snapshot_middleware/dir.rs
index aa1bc860..2ab10ba7 100644
--- a/src/snapshot_middleware/dir.rs
+++ b/src/snapshot_middleware/dir.rs
@@ -138,24 +138,12 @@ pub fn syncback_dir_no_meta<'sync>(
     let mut children = Vec::new();
     let mut removed_children = Vec::new();
 
-    // Seed taken_names with existing files on disk so new children don't
-    // collide with files already present in the directory.
-    let mut taken_names: HashSet<String> = snapshot
-        .vfs()
-        .read_dir(&snapshot.path)
-        .ok()
-        .map(|entries| {
-            entries
-                .filter_map(|e| e.ok())
-                .filter_map(|e| {
-                    e.path()
-                        .file_name()
-                        .and_then(|n| n.to_str())
-                        .map(|n| n.to_lowercase())
-                })
-                .collect()
-        })
-        .unwrap_or_default();
+    // taken_names tracks claimed bare slugs (without extensions) for dedup.
+    // It is NOT seeded from disk filenames — those contain extensions that
+    // would cause mismatches with bare-slug comparisons. Instead, old
+    // children's dedup_keys are accumulated as they are processed in the
+    // loop below (via name_for_inst's third return value).
+    let mut taken_names: HashSet<String> = HashSet::new();
 
     // Detect duplicate child names (case-insensitive for file system safety).
     // We skip duplicates instead of failing, tracking them in stats.
@@ -239,22 +227,18 @@ pub fn syncback_dir_no_meta<'sync>(
                     continue;
                 }
                 // This child exists in both doms. Pass it on.
-                let (child_snap, _needs_meta) = snapshot.with_joined_path(
+                let (child_snap, _needs_meta, dedup_key) = snapshot.with_joined_path(
                     *new_child_ref,
                     Some(old_child.id()),
                     &taken_names,
                 )?;
-                if let Some(name) = child_snap.path.file_name().and_then(|n| n.to_str()) {
-                    taken_names.insert(name.to_lowercase());
-                }
+                taken_names.insert(dedup_key.to_lowercase());
                 children.push(child_snap);
             } else {
                 // The child only exists in the the new dom
-                let (child_snap, _needs_meta) =
+                let (child_snap, _needs_meta, dedup_key) =
                     snapshot.with_joined_path(*new_child_ref, None, &taken_names)?;
-                if let Some(name) = child_snap.path.file_name().and_then(|n| n.to_str()) {
-                    taken_names.insert(name.to_lowercase());
-                }
+                taken_names.insert(dedup_key.to_lowercase());
                 children.push(child_snap);
             }
         }
@@ -299,11 +283,9 @@ pub fn syncback_dir_no_meta<'sync>(
             if snapshot.should_ignore_tree(*new_child_ref) {
                 continue;
             }
-            let (child_snap, _needs_meta) =
+            let (child_snap, _needs_meta, dedup_key) =
                 snapshot.with_joined_path(*new_child_ref, None, &taken_names)?;
-            if let Some(name) = child_snap.path.file_name().and_then(|n| n.to_str()) {
-                taken_names.insert(name.to_lowercase());
-            }
+            taken_names.insert(dedup_key.to_lowercase());
             children.push(child_snap);
         }
     }
diff --git a/src/snapshot_middleware/json_model.rs b/src/snapshot_middleware/json_model.rs
index 96056e46..8b2284fd 100644
--- a/src/snapshot_middleware/json_model.rs
+++ b/src/snapshot_middleware/json_model.rs
@@ -77,6 +77,11 @@ pub fn syncback_json_model<'sync>(
         // could have a performance cost.
         model.schema = old_inst.metadata().schema.clone();
         model.name = old_inst.metadata().specified_name.clone();
+    } else if snapshot.needs_meta_name {
+        // New instance whose filesystem name differs from the instance name
+        // (due to slugification or deduplication). Store the real name so it
+        // survives a round-trip through the filesystem.
+        model.name = Some(snapshot.new_inst().name.clone());
     }
 
     let serialized = match crate::json::to_vec_pretty_sorted(&model) {
diff --git a/src/snapshot_middleware/meta_file.rs b/src/snapshot_middleware/meta_file.rs
index 6a1ca9e2..c03a55c0 100644
--- a/src/snapshot_middleware/meta_file.rs
+++ b/src/snapshot_middleware/meta_file.rs
@@ -13,7 +13,7 @@ use crate::{
     json,
     resolution::UnresolvedValue,
     snapshot::InstanceSnapshot,
-    syncback::{name_needs_slugify, SyncbackSnapshot},
+    syncback::SyncbackSnapshot,
     RojoRef,
 };
 
@@ -165,15 +165,11 @@ impl AdjacentMetadata {
             .old_inst()
             .and_then(|inst| inst.metadata().specified_name.clone())
             .or_else(|| {
-                // If this is a new instance and its name is invalid for the filesystem,
-                // we need to specify the name in meta.json so it can be preserved
-                if snapshot.old_inst().is_none() {
-                    let instance_name = &snapshot.new_inst().name;
-                    if name_needs_slugify(instance_name) {
-                        Some(instance_name.clone())
-                    } else {
-                        None
-                    }
+                // If this is a new instance and its filesystem name differs from
+                // the instance name (due to slugification or deduplication), we
+                // need to specify the name in meta.json so it can be preserved.
+                if snapshot.old_inst().is_none() && snapshot.needs_meta_name {
+                    Some(snapshot.new_inst().name.clone())
                 } else {
                     None
                 }
@@ -431,15 +427,11 @@ impl DirectoryMetadata {
             .old_inst()
             .and_then(|inst| inst.metadata().specified_name.clone())
             .or_else(|| {
-                // If this is a new instance and its name is invalid for the filesystem,
-                // we need to specify the name in meta.json so it can be preserved
-                if snapshot.old_inst().is_none() {
-                    let instance_name = &snapshot.new_inst().name;
-                    if name_needs_slugify(instance_name) {
-                        Some(instance_name.clone())
-                    } else {
-                        None
-                    }
+                // If this is a new instance and its filesystem name differs from
+                // the instance name (due to slugification or deduplication), we
+                // need to specify the name in meta.json so it can be preserved.
+                if snapshot.old_inst().is_none() && snapshot.needs_meta_name {
+                    Some(snapshot.new_inst().name.clone())
                 } else {
                     None
                 }
diff --git a/src/snapshot_middleware/project.rs b/src/snapshot_middleware/project.rs
index bee9b971..9f04fc0e 100644
--- a/src/snapshot_middleware/project.rs
+++ b/src/snapshot_middleware/project.rs
@@ -648,8 +648,8 @@ pub fn syncback_project<'sync>(
         // All of the children in this loop are by their nature not in the
         // project, so we just need to run syncback on them.
         //
-        // Track taken names per parent directory so siblings under the same
-        // parent deduplicate against each other (and against existing files).
+        // Track taken names (bare slugs) per parent directory so siblings
+        // under the same parent deduplicate against each other.
         let mut taken_names_per_dir: std::collections::HashMap<
             std::path::PathBuf,
             std::collections::HashSet<String>,
@@ -690,35 +690,14 @@ pub fn syncback_project<'sync>(
                 if parent_middleware != Middleware::Project {
                     let taken_names = taken_names_per_dir
                         .entry(parent_path.clone())
-                        .or_insert_with(|| {
-                            // Seed with existing files on disk so new children
-                            // don't collide with files already present.
-                            vfs.read_dir(&parent_path)
-                                .ok()
-                                .map(|entries| {
-                                    entries
-                                        .filter_map(|e| e.ok())
-                                        .filter_map(|e| {
-                                            e.path()
-                                                .file_name()
-                                                .and_then(|n| n.to_str())
-                                                .map(|n| n.to_lowercase())
-                                        })
-                                        .collect()
-                                })
-                                .unwrap_or_default()
-                        });
-                    let (child_snap, _needs_meta) = snapshot.with_base_path(
+                        .or_insert_with(std::collections::HashSet::new);
+                    let (child_snap, _needs_meta, dedup_key) = snapshot.with_base_path(
                         &parent_path,
                         new_child.referent(),
                         None,
                         taken_names,
                     )?;
-                    if let Some(file_name) =
-                        child_snap.path.file_name().and_then(|n| n.to_str())
-                    {
-                        taken_names.insert(file_name.to_lowercase());
-                    }
+                    taken_names.insert(dedup_key.to_lowercase());
                     descendant_snapshots.push(child_snap);
                 }
             }
diff --git a/src/syncback/file_names.rs b/src/syncback/file_names.rs
index 09258883..c9955126 100644
--- a/src/syncback/file_names.rs
+++ b/src/syncback/file_names.rs
@@ -9,25 +9,37 @@ use rbx_dom_weak::Instance;
 
 use crate::{snapshot::InstanceWithMeta, snapshot_middleware::Middleware};
 
-/// Generates a filesystem name for an instance. Returns `(filename, needs_meta_name)`.
+/// Generates a filesystem name for an instance.
+/// Returns `(filename, needs_meta_name, dedup_key)`.
 ///
-/// - If `old_inst` exists, its existing path is preserved (incremental mode).
-/// - For new instances, names with forbidden chars are slugified and deduplicated
-///   against `taken_names`. The `bool` is `true` when the filesystem name differs
-///   from the instance name (meaning a `name` field must be written in metadata).
+/// - `filename`: The full filesystem name (including extension for file middleware).
+/// - `needs_meta_name`: `true` when the filesystem name differs from the instance
+///   name (meaning a `name` field must be written in metadata).
+/// - `dedup_key`: The bare slug (without extension) that callers must insert into
+///   `taken_names`. This is the name-level identifier used for collision detection.
+///   Callers should **always** use `dedup_key` (not `filename`) when accumulating
+///   into `taken_names`.
+///
+/// If `old_inst` exists, its existing path is preserved (incremental mode).
+/// For new instances, names with forbidden chars are slugified and deduplicated
+/// against `taken_names`.
 pub fn name_for_inst<'a>(
     middleware: Middleware,
     new_inst: &'a Instance,
     old_inst: Option<InstanceWithMeta<'a>>,
     taken_names: &HashSet<String>,
-) -> anyhow::Result<(Cow<'a, str>, bool)> {
+) -> anyhow::Result<(Cow<'a, str>, bool, String)> {
     if let Some(old_inst) = old_inst {
         if let Some(source) = old_inst.metadata().relevant_paths.first() {
             let name = source
                 .file_name()
                 .and_then(|s| s.to_str())
                 .context("sources on the file system should be valid unicode and not be stubs")?;
-            Ok((Cow::Borrowed(name), false))
+            // Derive dedup_key by stripping the middleware extension from the
+            // filename. For Dir middleware the extension is empty so this is a
+            // no-op. This keeps extension logic inside this function.
+            let dedup_key = strip_middleware_extension(name, middleware);
+            Ok((Cow::Borrowed(name), false, dedup_key))
         } else {
             anyhow::bail!(
                 "members of 'old' trees should have an instigating source. Somehow, {} did not.",
@@ -54,18 +66,44 @@ pub fn name_for_inst<'a>(
             | Middleware::LegacyScriptDir => {
                 let deduped = deduplicate_name(&base, taken_names);
                 let needs_meta = needs_slugify || deduped != base;
-                Ok((Cow::Owned(deduped), needs_meta))
+                let dedup_key = deduped.clone();
+                Ok((Cow::Owned(deduped), needs_meta, dedup_key))
             }
             _ => {
                 let extension = extension_for_middleware(middleware);
                 let deduped = deduplicate_name(&base, taken_names);
                 let needs_meta = needs_slugify || deduped != base;
-                Ok((Cow::Owned(format!("{deduped}.{extension}")), needs_meta))
+                let dedup_key = deduped.clone();
+                Ok((Cow::Owned(format!("{deduped}.{extension}")), needs_meta, dedup_key))
             }
         }
     }
 }
 
+/// Strips the middleware extension from a filename to recover the bare slug.
+/// Used internally by `name_for_inst` to derive the dedup key for old instances.
+fn strip_middleware_extension(filename: &str, middleware: Middleware) -> String {
+    // Dir middleware has no extension — filename IS the slug
+    match middleware {
+        Middleware::Dir
+        | Middleware::CsvDir
+        | Middleware::ServerScriptDir
+        | Middleware::ClientScriptDir
+        | Middleware::ModuleScriptDir
+        | Middleware::PluginScriptDir
+        | Middleware::LocalScriptDir
+        | Middleware::LegacyScriptDir => filename.to_string(),
+        _ => {
+            let ext = extension_for_middleware(middleware);
+            let suffix = format!(".{ext}");
+            filename
+                .strip_suffix(&suffix)
+                .unwrap_or(filename)
+                .to_string()
+        }
+    }
+}
+
 /// Returns the extension a provided piece of middleware is supposed to use.
 pub fn extension_for_middleware(middleware: Middleware) -> &'static str {
     match middleware {
@@ -652,7 +690,7 @@ mod tests {
         let child = dom.get_by_ref(child_ref).unwrap();
         let taken = HashSet::new();
 
-        let (filename, needs_meta) =
+        let (filename, needs_meta, _dk) =
             name_for_inst(Middleware::ModuleScript, child, None, &taken).unwrap();
         assert_eq!(filename.as_ref(), "MyModule.luau");
         assert!(!needs_meta);
@@ -665,7 +703,7 @@ mod tests {
         let child = dom.get_by_ref(child_ref).unwrap();
         let taken = HashSet::new();
 
-        let (filename, needs_meta) = name_for_inst(Middleware::Dir, child, None, &taken).unwrap();
+        let (filename, needs_meta, _dk) = name_for_inst(Middleware::Dir, child, None, &taken).unwrap();
         assert_eq!(filename.as_ref(), "MyFolder");
         assert!(!needs_meta);
     }
@@ -677,7 +715,7 @@ mod tests {
         let child = dom.get_by_ref(child_ref).unwrap();
         let taken = HashSet::new();
 
-        let (filename, needs_meta) =
+        let (filename, needs_meta, _dk) =
             name_for_inst(Middleware::ModuleScript, child, None, &taken).unwrap();
         assert_eq!(filename.as_ref(), "Hey_Bro.luau");
         assert!(needs_meta, "slug differs from real name, needs meta");
@@ -690,7 +728,7 @@ mod tests {
         let child = dom.get_by_ref(child_ref).unwrap();
         let taken = HashSet::new();
 
-        let (filename, needs_meta) = name_for_inst(Middleware::Dir, child, None, &taken).unwrap();
+        let (filename, needs_meta, _dk) = name_for_inst(Middleware::Dir, child, None, &taken).unwrap();
         assert_eq!(filename.as_ref(), "Hey_Bro");
         assert!(needs_meta);
     }
@@ -702,7 +740,7 @@ mod tests {
         let child = dom.get_by_ref(child_ref).unwrap();
         let taken: HashSet<String> = ["foo".to_string()].into_iter().collect();
 
-        let (filename, needs_meta) =
+        let (filename, needs_meta, _dk) =
             name_for_inst(Middleware::ModuleScript, child, None, &taken).unwrap();
         assert_eq!(filename.as_ref(), "Foo~1.luau");
         assert!(needs_meta, "deduped name differs from original");
@@ -715,7 +753,7 @@ mod tests {
         let child = dom.get_by_ref(child_ref).unwrap();
         let taken: HashSet<String> = ["stuff".to_string()].into_iter().collect();
 
-        let (filename, needs_meta) = name_for_inst(Middleware::Dir, child, None, &taken).unwrap();
+        let (filename, needs_meta, _dk) = name_for_inst(Middleware::Dir, child, None, &taken).unwrap();
         assert_eq!(filename.as_ref(), "Stuff~1");
         assert!(needs_meta);
     }
@@ -728,7 +766,7 @@ mod tests {
         let child = dom.get_by_ref(child_ref).unwrap();
         let taken: HashSet<String> = ["hey_bro".to_string()].into_iter().collect();
 
-        let (filename, needs_meta) =
+        let (filename, needs_meta, _dk) =
             name_for_inst(Middleware::ModuleScript, child, None, &taken).unwrap();
         assert_eq!(filename.as_ref(), "Hey_Bro~1.luau");
         assert!(needs_meta);
@@ -741,7 +779,7 @@ mod tests {
         let child = dom.get_by_ref(child_ref).unwrap();
         let taken = HashSet::new();
 
-        let (filename, needs_meta) =
+        let (filename, needs_meta, _dk) =
             name_for_inst(Middleware::ServerScript, child, None, &taken).unwrap();
         assert_eq!(filename.as_ref(), "Main.server.luau");
         assert!(!needs_meta);
@@ -754,7 +792,7 @@ mod tests {
         let child = dom.get_by_ref(child_ref).unwrap();
         let taken = HashSet::new();
 
-        let (filename, needs_meta) =
+        let (filename, needs_meta, _dk) =
             name_for_inst(Middleware::ClientScript, child, None, &taken).unwrap();
         assert_eq!(filename.as_ref(), "Client.client.luau");
         assert!(!needs_meta);
@@ -767,7 +805,7 @@ mod tests {
         let child = dom.get_by_ref(child_ref).unwrap();
         let taken = HashSet::new();
 
-        let (filename, needs_meta) = name_for_inst(Middleware::Text, child, None, &taken).unwrap();
+        let (filename, needs_meta, _dk) = name_for_inst(Middleware::Text, child, None, &taken).unwrap();
         assert_eq!(filename.as_ref(), "Readme.txt");
         assert!(!needs_meta);
     }
@@ -788,7 +826,7 @@ mod tests {
         let child_ref = dom.root().children()[0];
         let child = dom.get_by_ref(child_ref).unwrap();
         let taken_set: HashSet<String> = taken.iter().map(|s| s.to_string()).collect();
-        let (filename, needs_meta) = name_for_inst(mw, child, None, &taken_set).unwrap();
+        let (filename, needs_meta, _dk) = name_for_inst(mw, child, None, &taken_set).unwrap();
         (filename.into_owned(), needs_meta)
     }
 
@@ -1081,9 +1119,9 @@ mod tests {
             let dom = make_inst(name, "Folder");
             let child_ref = dom.root().children()[0];
             let child = dom.get_by_ref(child_ref).unwrap();
-            let (filename, needs_meta) =
+            let (filename, needs_meta, dedup_key) =
                 name_for_inst(Middleware::Dir, child, None, &taken).unwrap();
-            taken.insert(filename.to_lowercase().to_string());
+            taken.insert(dedup_key.to_lowercase());
             results.push((name.to_string(), filename.into_owned(), needs_meta));
         }
         results
@@ -1411,7 +1449,7 @@ mod tests {
         disk_entries: &[&str],
         new_children: &[(&str, Middleware)],
     ) -> Vec<(String, String, bool)> {
-        // Seed from "disk" (lowercased, as the fix does)
+        // Seed from bare slugs (simulates tree-based seeding)
         let mut taken: HashSet<String> = disk_entries
             .iter()
             .map(|e| e.to_lowercase())
@@ -1421,9 +1459,9 @@ mod tests {
             let dom = make_inst(name, "ModuleScript");
             let child_ref = dom.root().children()[0];
             let child = dom.get_by_ref(child_ref).unwrap();
-            let (filename, needs_meta) =
+            let (filename, needs_meta, dedup_key) =
                 name_for_inst(mw, child, None, &taken).unwrap();
-            taken.insert(filename.to_lowercase().to_string());
+            taken.insert(dedup_key.to_lowercase());
             results.push((name.to_string(), filename.into_owned(), needs_meta));
         }
         results
@@ -1497,46 +1535,30 @@ mod tests {
     }
 
     #[test]
-    fn disk_seed_file_middleware_dedup_compares_bare_slugs() {
-        // IMPORTANT: For file middleware, deduplicate_name compares the
-        // bare slug against taken_names. Disk entries with extensions
-        // (e.g., "mymodule.luau") do NOT collide with the bare slug
-        // "MyModule" because "mymodule" ≠ "mymodule.luau".
-        //
-        // This is by design — duplicate-named children are already skipped
-        // by dir.rs's duplicate detection before reaching name_for_inst.
-        // File middleware dedup only catches slug collisions between
-        // DIFFERENT names (e.g., "A/B" and "A:B" both slugify to "A_B").
+    fn disk_seed_file_middleware_collides_with_bare_slug() {
+        // taken_names now uses bare slugs (dedup_keys), so file-format
+        // dedup works correctly. "mymodule" in taken matches slug "MyModule".
         let r = process_new_children_with_disk_seed(
-            &["mymodule.luau"],
+            &["mymodule"],
             &[("MyModule", Middleware::ModuleScript)],
         );
-        // Bare slug "mymodule" ≠ "mymodule.luau" in taken_names.
-        // No collision detected — this is the expected behavior.
-        assert_eq!(r[0].1, "MyModule.luau");
-        assert!(!r[0].2);
+        assert_eq!(r[0].1, "MyModule~1.luau");
+        assert!(r[0].2, "dedup suffix means needs meta");
     }
 
     #[test]
-    fn disk_seed_file_middleware_sibling_slug_collision_works() {
+    fn disk_seed_file_middleware_sibling_slug_collision_deduped() {
         // Two file-middleware children whose names slugify to the same base.
-        // The FIRST child's full filename gets added to taken_names,
-        // and the second child's bare slug doesn't match that filename.
-        // However, bare slugs DO collide with each other through accumulation:
-        // First: slug "A_B" → not in taken → filename "A_B.luau" → taken gets "a_b.luau"
-        // Second: slug "A_B" → "a_b" not in taken (has "a_b.luau") → filename "A_B.luau"
-        // This demonstrates that file-middleware sibling dedup relies on the
-        // duplicate-name pre-filter in dir.rs (which skips same-named children).
+        // Since taken_names accumulates dedup_keys (bare slugs), the second
+        // child correctly detects the collision and gets ~1.
         let r = process_new_children_with_disk_seed(
             &[],
             &[("A/B", Middleware::ModuleScript), ("A:B", Middleware::ModuleScript)],
         );
-        // Both get the same filename because bare slug dedup doesn't
-        // catch full-filename entries. This is acceptable because in real
-        // dir.rs, children with different instance names but same slug
-        // would need the full duplicate-name resolution system (Phase 2).
         assert_eq!(r[0].1, "A_B.luau");
-        assert_eq!(r[1].1, "A_B.luau");
+        assert!(r[0].2);
+        assert_eq!(r[1].1, "A_B~1.luau");
+        assert!(r[1].2);
     }
 
     #[test]
@@ -1619,9 +1641,9 @@ mod tests {
             let dom = make_inst(name, "ModuleScript");
             let child_ref = dom.root().children()[0];
             let child = dom.get_by_ref(child_ref).unwrap();
-            let (filename, needs_meta) =
+            let (filename, needs_meta, dedup_key) =
                 name_for_inst(mw, child, None, &taken).unwrap();
-            taken.insert(filename.to_lowercase().to_string());
+            taken.insert(dedup_key.to_lowercase());
             results.push((name.to_string(), filename.into_owned(), needs_meta));
         }
         results
@@ -1889,9 +1911,9 @@ mod tests {
     #[test]
     fn nightmare_mixed_middleware_file_then_dir() {
         // Reverse order: ModuleScript first, Dir second.
-        // ModuleScript "Shared" → filename "Shared.luau" → taken gets "shared.luau"
-        // Dir "Shared" → slug "Shared" → dedup checks "shared" → NOT in taken
-        // ("shared" ≠ "shared.luau") → filename "Shared" → taken gets "shared"
+        // ModuleScript "Shared" → dedup_key "shared" → taken gets "shared"
+        // Dir "Shared" → slug "Shared" → dedup checks "shared" → MATCH
+        // (dedup_key-based taken catches this correctly) → "Shared~1"
         let r = process_new_children_with_disk_seed(
             &[],
             &[
@@ -1901,9 +1923,9 @@ mod tests {
         );
         assert_eq!(r[0].1, "Shared.luau");
         assert!(!r[0].2);
-        // Dir slug "Shared" doesn't collide with "shared.luau" in taken
-        assert_eq!(r[1].1, "Shared");
-        assert!(!r[1].2);
+        // Dir slug "Shared" collides with dedup_key "shared" from the ModuleScript
+        assert_eq!(r[1].1, "Shared~1");
+        assert!(r[1].2, "dedup suffix means different from instance name");
     }
 
     #[test]
@@ -2100,7 +2122,7 @@ mod tests {
             let child_ref = dom.root().children()[0];
             let child = dom.get_by_ref(child_ref).unwrap();
             let taken = HashSet::new();
-            let (filename, needs_meta) =
+            let (filename, needs_meta, _dk) =
                 name_for_inst(Middleware::Dir, child, None, &taken).unwrap();
             if needs_meta {
                 assert_ne!(
diff --git a/src/syncback/mod.rs b/src/syncback/mod.rs
index 27651213..bb1eb019 100644
--- a/src/syncback/mod.rs
+++ b/src/syncback/mod.rs
@@ -451,6 +451,7 @@ pub fn syncback_loop_with_stats(
         new: new_tree.root_ref(),
         path: project.file_location.clone(),
         middleware: Some(Middleware::Project),
+        needs_meta_name: false,
     }];
 
     let mut fs_snapshot = FsSnapshot::new();
diff --git a/src/syncback/snapshot.rs b/src/syncback/snapshot.rs
index 3c7179d6..e2cd018b 100644
--- a/src/syncback/snapshot.rs
+++ b/src/syncback/snapshot.rs
@@ -47,6 +47,10 @@ pub struct SyncbackSnapshot<'sync> {
     pub new: Ref,
     pub path: PathBuf,
     pub middleware: Option<Middleware>,
+    /// When `true`, the filesystem name differs from the instance name
+    /// (due to slugification or deduplication) and a `name` field must be
+    /// written in the metadata file to preserve the real instance name.
+    pub needs_meta_name: bool,
 }
 
 impl<'sync> SyncbackSnapshot<'sync> {
@@ -62,7 +66,7 @@ impl<'sync> SyncbackSnapshot<'sync> {
         new_ref: Ref,
         old_ref: Option<Ref>,
         taken_names: &HashSet<String>,
-    ) -> anyhow::Result<(Self, bool)> {
+    ) -> anyhow::Result<(Self, bool, String)> {
         // In clean mode, ignore old_ref to ensure fresh structure
         let effective_old_ref = if self.data.incremental { old_ref } else { None };
         let mut snapshot = Self {
@@ -71,17 +75,19 @@ impl<'sync> SyncbackSnapshot<'sync> {
             new: new_ref,
             path: PathBuf::new(),
             middleware: None,
+            needs_meta_name: false,
         };
         let middleware = get_best_middleware(&snapshot);
-        let (name, needs_meta_name) = name_for_inst(
+        let (name, needs_meta_name, dedup_key) = name_for_inst(
             middleware,
             snapshot.new_inst(),
             snapshot.old_inst(),
             taken_names,
         )?;
         snapshot.path = self.path.join(&*name);
+        snapshot.needs_meta_name = needs_meta_name;
 
-        Ok((snapshot, needs_meta_name))
+        Ok((snapshot, needs_meta_name, dedup_key))
     }
 
     /// Constructs a SyncbackSnapshot from the provided refs and a base path,
@@ -99,7 +105,7 @@ impl<'sync> SyncbackSnapshot<'sync> {
         new_ref: Ref,
         old_ref: Option<Ref>,
         taken_names: &HashSet<String>,
-    ) -> anyhow::Result<(Self, bool)> {
+    ) -> anyhow::Result<(Self, bool, String)> {
         // In clean mode, ignore old_ref to ensure fresh structure
         let effective_old_ref = if self.data.incremental { old_ref } else { None };
         let mut snapshot = Self {
@@ -108,17 +114,19 @@ impl<'sync> SyncbackSnapshot<'sync> {
             new: new_ref,
             path: PathBuf::new(),
             middleware: None,
+            needs_meta_name: false,
         };
         let middleware = get_best_middleware(&snapshot);
-        let (name, needs_meta_name) = name_for_inst(
+        let (name, needs_meta_name, dedup_key) = name_for_inst(
             middleware,
             snapshot.new_inst(),
             snapshot.old_inst(),
             taken_names,
         )?;
         snapshot.path = base_path.join(&*name);
+        snapshot.needs_meta_name = needs_meta_name;
 
-        Ok((snapshot, needs_meta_name))
+        Ok((snapshot, needs_meta_name, dedup_key))
     }
 
     /// Constructs a SyncbackSnapshot with the provided path and refs while
@@ -131,6 +139,7 @@ impl<'sync> SyncbackSnapshot<'sync> {
             new: new_ref,
             path,
             middleware: None,
+            needs_meta_name: false,
         }
     }
 
diff --git a/src/web/api.rs b/src/web/api.rs
index c96d6e86..995df0d9 100644
--- a/src/web/api.rs
+++ b/src/web/api.rs
@@ -899,8 +899,28 @@ impl ApiService {
             }
         };
 
+        // Seed sibling slugs from the tree's existing children of the parent.
+        // This gives us bare instance-name-level slugs (no extensions) for
+        // accurate dedup against existing siblings.
+        let sibling_slugs: HashSet<String> = {
+            use crate::syncback::name_needs_slugify;
+            parent_instance
+                .children()
+                .iter()
+                .filter_map(|r| tree.get_instance(*r))
+                .map(|inst| {
+                    let name = inst.name();
+                    if name_needs_slugify(name) {
+                        slugify_name(name).to_lowercase()
+                    } else {
+                        name.to_lowercase()
+                    }
+                })
+                .collect()
+        };
+
         // Create the instance at the resolved path
-        self.syncback_instance_to_path_with_stats(added, &parent_dir, stats)
+        self.syncback_instance_to_path_with_stats(added, &parent_dir, stats, &sibling_slugs)
     }
 
     /// Update an existing instance in place instead of creating new files.
@@ -1056,8 +1076,9 @@ impl ApiService {
 
                     // Process children using normal syncback path
                     // This will use detect_existing_script_format to check existing files
+                    let child_slugs = Self::compute_sibling_slugs(&unique_children);
                     for child in &unique_children {
-                        self.syncback_instance_to_path_with_stats(child, &children_dir, stats)?;
+                        self.syncback_instance_to_path_with_stats(child, &children_dir, stats, &child_slugs)?;
                     }
                 }
             }
@@ -1081,8 +1102,9 @@ impl ApiService {
                         let unique_children =
                             self.filter_duplicate_children(&added.children, &inst_path, stats);
 
+                        let child_slugs = Self::compute_sibling_slugs(&unique_children);
                         for child in &unique_children {
-                            self.syncback_instance_to_path_with_stats(child, existing_path, stats)?;
+                            self.syncback_instance_to_path_with_stats(child, existing_path, stats, &child_slugs)?;
                         }
                     }
                 } else {
@@ -1584,17 +1606,42 @@ impl ApiService {
     ) -> anyhow::Result<()> {
         // Use a default stats tracker for backwards compatibility
         let stats = crate::syncback::SyncbackStats::new();
-        self.syncback_instance_to_path_with_stats(added, parent_dir, &stats)
+        let sibling_slugs = HashSet::new();
+        self.syncback_instance_to_path_with_stats(added, parent_dir, &stats, &sibling_slugs)
+    }
+
+    /// Computes slugified sibling names from a slice of `AddedInstance` references.
+    /// Returns a `HashSet` of lowercased bare slugs suitable for `deduplicate_name`.
+    fn compute_sibling_slugs(
+        children: &[&crate::web::interface::AddedInstance],
+    ) -> HashSet<String> {
+        use crate::syncback::name_needs_slugify;
+        children
+            .iter()
+            .map(|c| {
+                if name_needs_slugify(&c.name) {
+                    slugify_name(&c.name).to_lowercase()
+                } else {
+                    c.name.to_lowercase()
+                }
+            })
+            .collect()
     }
 
     /// Recursively syncback an instance and its children to the filesystem.
     /// This is the internal implementation that handles the actual file creation.
     /// Uses the provided stats tracker for recording issues.
+    ///
+    /// `sibling_slugs` contains the slugified names of all siblings in the
+    /// parent directory (bare slugs, lowercased). This is used by
+    /// `deduplicate_name` to avoid collisions. Callers compute this from
+    /// tree children or `AddedInstance` siblings — never from disk filenames.
     fn syncback_instance_to_path_with_stats(
         &self,
         added: &crate::web::interface::AddedInstance,
         parent_dir: &std::path::Path,
         stats: &crate::syncback::SyncbackStats,
+        sibling_slugs: &HashSet<String>,
     ) -> anyhow::Result<()> {
         use crate::syncback::{deduplicate_name, name_needs_slugify};
         use anyhow::Context;
@@ -1608,24 +1655,10 @@ impl ApiService {
             added.name.clone()
         };
 
-        // Deduplicate against existing files in the parent directory to prevent
-        // collisions (e.g., two instances whose slugified names match, or a new
-        // instance whose name matches an existing file).
-        let taken_names: HashSet<String> = if parent_dir.is_dir() {
-            fs::read_dir(parent_dir)
-                .ok()
-                .map(|entries| {
-                    entries
-                        .filter_map(|e| e.ok())
-                        .filter_map(|e| e.file_name().into_string().ok())
-                        .map(|n| n.to_lowercase())
-                        .collect()
-                })
-                .unwrap_or_default()
-        } else {
-            HashSet::new()
-        };
-        let encoded_name = deduplicate_name(&base_name, &taken_names);
+        // Deduplicate against sibling slugs (bare instance-name-level slugs,
+        // not filenames with extensions). This ensures file-format instances
+        // are correctly detected as collisions.
+        let encoded_name = deduplicate_name(&base_name, sibling_slugs);
         let needs_meta_name = needs_slug || encoded_name != base_name;
         let meta_name_field: Option<&str> = if needs_meta_name {
             Some(&added.name)
@@ -1640,6 +1673,9 @@ impl ApiService {
         let unique_children = self.filter_duplicate_children(&added.children, &inst_path, stats);
         let has_children = !unique_children.is_empty();
 
+        // Pre-compute sibling slugs for children's dedup (bare slugs, no extensions).
+        let child_slugs = Self::compute_sibling_slugs(&unique_children);
+
         // Determine the appropriate middleware/file format based on class name.
         // This matches the logic in src/syncback/mod.rs::get_best_middleware.
         //
@@ -1699,7 +1735,7 @@ impl ApiService {
                     self.write_script_meta_json_if_needed(&dir_path, added, meta_name_field)?;
                     log::info!("Syncback: Updated ModuleScript at {}", init_path.display());
                     for child in &unique_children {
-                        self.syncback_instance_to_path_with_stats(child, &dir_path, stats)?;
+                        self.syncback_instance_to_path_with_stats(child, &dir_path, stats, &child_slugs)?;
                     }
                 } else {
                     let file_path = parent_dir.join(format!("{}.luau", encoded_name));
@@ -1756,7 +1792,7 @@ impl ApiService {
                     self.write_script_meta_json_if_needed(&dir_path, added, meta_name_field)?;
                     log::info!("Syncback: Updated Script at {}", init_path.display());
                     for child in &unique_children {
-                        self.syncback_instance_to_path_with_stats(child, &dir_path, stats)?;
+                        self.syncback_instance_to_path_with_stats(child, &dir_path, stats, &child_slugs)?;
                     }
                 } else {
                     let file_path =
@@ -1813,7 +1849,7 @@ impl ApiService {
                     self.write_script_meta_json_if_needed(&dir_path, added, meta_name_field)?;
                     log::info!("Syncback: Updated LocalScript at {}", init_path.display());
                     for child in &unique_children {
-                        self.syncback_instance_to_path_with_stats(child, &dir_path, stats)?;
+                        self.syncback_instance_to_path_with_stats(child, &dir_path, stats, &child_slugs)?;
                     }
                 } else {
                     let file_path = parent_dir.join(format!("{}.local.luau", encoded_name));
@@ -1864,7 +1900,7 @@ impl ApiService {
 
                 // Recursively process children
                 for child in &unique_children {
-                    self.syncback_instance_to_path_with_stats(child, &dir_path, stats)?;
+                    self.syncback_instance_to_path_with_stats(child, &dir_path, stats, &child_slugs)?;
                 }
             }
 
@@ -1883,7 +1919,7 @@ impl ApiService {
                         dir_path.display()
                     );
                     for child in &unique_children {
-                        self.syncback_instance_to_path_with_stats(child, &dir_path, stats)?;
+                        self.syncback_instance_to_path_with_stats(child, &dir_path, stats, &child_slugs)?;
                     }
                 } else {
                     let value = added
@@ -1925,7 +1961,7 @@ impl ApiService {
                         dir_path.display()
                     );
                     for child in &unique_children {
-                        self.syncback_instance_to_path_with_stats(child, &dir_path, stats)?;
+                        self.syncback_instance_to_path_with_stats(child, &dir_path, stats, &child_slugs)?;
                     }
                 } else {
                     let file_path = parent_dir.join(format!("{}.csv", encoded_name));
@@ -1979,7 +2015,7 @@ impl ApiService {
 
                     // Recursively process children
                     for child in &unique_children {
-                        self.syncback_instance_to_path_with_stats(child, &dir_path, stats)?;
+                        self.syncback_instance_to_path_with_stats(child, &dir_path, stats, &child_slugs)?;
                     }
                 } else {
                     let content = self.serialize_instance_to_model_json(added)?;
@@ -6208,50 +6244,25 @@ mod tests {
         // ── File-format behavior documentation ───────────────────────
 
         #[test]
-        fn file_format_bare_slug_vs_full_filename_limitation() {
-            // DOCUMENTS KNOWN BEHAVIOR: deduplicate_name checks bare slug
-            // "Foo" against taken entries. When taken comes from fs::read_dir,
-            // entries have extensions ("foo.luau"). "foo" ≠ "foo.luau" so no
-            // collision is detected. This is by design — duplicate-named
-            // file instances are filtered by the plugin before reaching the API.
-            let temp = tempdir().expect("Failed to create temp dir");
-            File::create(temp.path().join("Foo.luau"))
-                .unwrap()
-                .write_all(b"existing")
-                .unwrap();
-
-            let taken: HashSet<String> = fs::read_dir(temp.path())
-                .unwrap()
-                .filter_map(|e| e.ok())
-                .filter_map(|e| e.file_name().into_string().ok())
-                .map(|n| n.to_lowercase())
-                .collect();
-
-            assert!(taken.contains("foo.luau"));
-            assert!(!taken.contains("foo"));
-            // Bare slug doesn't match full filename
+        fn file_format_dedup_with_bare_slugs() {
+            // Production code now seeds taken_names from tree siblings'
+            // slugified instance names (bare slugs, no extensions).
+            // This means file-format dedup works correctly.
+            let taken: HashSet<String> = ["foo".to_string()].into_iter().collect();
+            // Bare slug "Foo" matches "foo" in taken
             let deduped = deduplicate_name("Foo", &taken);
-            assert_eq!(deduped, "Foo", "bare slug doesn't match 'foo.luau'");
+            assert_eq!(deduped, "Foo~1", "bare slug collides with existing sibling");
         }
 
         #[test]
-        fn file_format_slugify_still_works() {
-            // Even though dedup doesn't catch cross-file collisions,
-            // slugification itself always works correctly.
-            let temp = tempdir().expect("Failed to create temp dir");
-            let taken = HashSet::new();
+        fn file_format_slugify_and_dedup_combined() {
+            // Slugify + dedup pipeline works end-to-end for file format
+            let taken: HashSet<String> = ["hey_bro".to_string()].into_iter().collect();
 
             let slug = slugify_name("Hey/Bro");
             assert_eq!(slug, "Hey_Bro");
             let deduped = deduplicate_name(&slug, &taken);
-            assert_eq!(deduped, "Hey_Bro");
-
-            let file_path = temp.path().join("Hey_Bro.luau");
-            File::create(&file_path)
-                .unwrap()
-                .write_all(b"content")
-                .unwrap();
-            assert!(file_path.exists());
+            assert_eq!(deduped, "Hey_Bro~1", "slug collision correctly detected");
         }
 
         // ── Rename → re-add cycle (the critical slug safety test) ────