Since you said, this is wrong, I went ahead manually confirmed this working in the following build
cPanel Version 11.24.5-STABLE

If you create a new username with the same name, with a different password, it gets overwritten.

Also, what you are telling is absolutely right, you can change password via method you posted (have updated in my post), BUT its only possible via WHM by administrators. What if a user needs to reset his database password, he can use the method i posted to do so via cPanel itself.

To reset the MySQL password, simply log into WHM and select either:

1) “MySQL Root Password” (and change it) or
2) “Change a User or Database Password” (to change a specific password)

It’s as simple as that.