using taxonomy_term to override taxonomy pages

this seems to problem with the menu system handling of drupal, it just don't use aliases at all, not sure about this.

but you can two things to solve your problem:

1. use panels3 to overwrite the taxonomy page
2. use the module field in {vocabulary} to add your custom module and use hook_term_path in this module, to provide a alternative path

You're probably confusing the aliased page with the actual page. If you're using pathauto, and I am fairly sure you are, the alias pathauto generates is invisible to Drupal. It still sees taxonomy/term/TID which is why you still get the original page. Try taxonomy redirect or Panels 3.

I was having trouble understanding the suggestions here, and it took me some time to get un-confused, so I want to share my delusion in case others suffer from similar.

Wrong Way:
After enabling the taxonomy_term View, I changed the path for the [page] View to use the same naming convention as set for taxonomy terms in Automated alias settings -- in my case, category/[vocab-raw]/[catpath-raw], so something like category/%/%. I made the term argument in the View to convert from term name to term ID.

The new View worked fine in the Preview, and if I set the path to something other than what the Automated alias settings had defined, but when I tried to duplicate/override the same path, I would only see the default page and not my View.

Right Way:
The solution is to do almost no work at all: just use the default path for the View -- taxonomy/term/% -- and the default argument -- Term ID, (instead of converted to term name.) The view will override the actual taxonomy page, which is pointed to by the [automated] alias. Since the alias, underneath, just points to that page, (taxonomy/term/%), it is taken care of, implicitly. There's no need to make the View path the same as the aliased path.