This option seems to work like pooled midi item. When you open item that was copied all of those copies will be updated with you edit but...
It only works for this option checked:
Also option to edit midi item in external primary or secondary editor require and work with this option checked.
Also if you use external .mid files instead of internal in poject option you will be always prompted to save file when you make any change in midi editor (which can be annoying).