I have not had this issue.
In the dialog box (working from memory as I only have access to Ss4) you have to select the design surface, as long as the New Surface for Each Corridor is not checked. Also, there are additional toggles once this is activated in this manner.
Personally, I have had issues with features and components when trying to update/replace as sometimes the edits made requiring the update result in orphaned features which then remain and muck up the works.
So I usually open the Cross Section dialog and remove any Features and Components being displayed from the target surface and then create the new surface, telling it to empty the surface. This preserves the GUID of the DTM, so refresh surface still works in plan/profile and cross section, but assigns new GUIDs to the Components and Features, which is OK since I already removed them from my sections.
Then, it is a simple matter to add the features and components back in and to refresh the surface.