Help please...AE CS6 won't let me replace clips in the timeline

After Effects won't let me replace clips in the timeline. 
I have selected the clip I want to replace. 
I have selected the new clip in the project window. 
I then option-drag the new clip to the timeline and it will only let me drop the clip in making a new track above or below the clip I want to replace. 
It won't allow me to replace it. 
I'm using CS6 on an iMAC 3.1 Intel Corei5  16GB RAM. 
I've been using AE since 1996 and have not had this problem. 
Can anyone help? ~ thanks!
2mix Media

This one actually shows the correct file highlighted in the project window - I'm trying to replace the png in the timeline with the AI file in the project window.

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