diff --git a/Install-Claude.ps1 b/Install-Claude.ps1
index 36723662..8c332257 100644
--- a/Install-Claude.ps1
+++ b/Install-Claude.ps1
@@ -646,6 +646,37 @@ function Backup-AndReplaceDirectory {
     return $true
 }
 
+function Backup-CriticalConfigFiles {
+    param(
+        [string]$TargetDirectory,
+        [string]$BackupFolder,
+        [string[]]$FileNames
+    )
+
+    if (-not $BackupFolder -or $NoBackup) {
+        return
+    }
+
+    if (-not (Test-Path $TargetDirectory)) {
+        return
+    }
+
+    $backedUpCount = 0
+    foreach ($fileName in $FileNames) {
+        $filePath = Join-Path $TargetDirectory $fileName
+        if (Test-Path $filePath) {
+            if (Backup-FileToFolder -FilePath $filePath -BackupFolder $BackupFolder) {
+                Write-ColorOutput "Critical config backed up: $fileName" $ColorSuccess
+                $backedUpCount++
+            }
+        }
+    }
+
+    if ($backedUpCount -gt 0) {
+        Write-ColorOutput "Backed up $backedUpCount critical configuration file(s)" $ColorInfo
+    }
+}
+
 function Merge-DirectoryContents {
     param(
         [string]$Source,
@@ -1227,9 +1258,9 @@ function Install-Global {
         }
     }
 
-    # Replace .claude directory (backup → clear → copy entire folder)
-    Write-ColorOutput "Installing .claude directory..." $ColorInfo
-    $claudeInstalled = Backup-AndReplaceDirectory -Source $sourceClaudeDir -Destination $globalClaudeDir -Description ".claude directory" -BackupFolder $backupFolder
+    # Merge .claude directory (incremental overlay - preserves user files)
+    Write-ColorOutput "Installing .claude directory (incremental merge)..." $ColorInfo
+    $claudeInstalled = Merge-DirectoryContents -Source $sourceClaudeDir -Destination $globalClaudeDir -Description ".claude directory" -BackupFolder $backupFolder
 
     # Track .claude directory in manifest
     if ($claudeInstalled) {
@@ -1253,9 +1284,12 @@ function Install-Global {
         Add-ManifestEntry -Manifest $manifest -Path $globalClaudeMd -Type "File"
     }
 
-    # Replace .codex directory (backup → clear → copy entire folder)
-    Write-ColorOutput "Installing .codex directory..." $ColorInfo
-    $codexInstalled = Backup-AndReplaceDirectory -Source $sourceCodexDir -Destination $globalCodexDir -Description ".codex directory" -BackupFolder $backupFolder
+    # Backup critical config files in .codex directory before installation
+    Backup-CriticalConfigFiles -TargetDirectory $globalCodexDir -BackupFolder $backupFolder -FileNames @("AGENTS.md")
+
+    # Merge .codex directory (incremental overlay - preserves user files)
+    Write-ColorOutput "Installing .codex directory (incremental merge)..." $ColorInfo
+    $codexInstalled = Merge-DirectoryContents -Source $sourceCodexDir -Destination $globalCodexDir -Description ".codex directory" -BackupFolder $backupFolder
 
     # Track .codex directory in manifest
     if ($codexInstalled) {
@@ -1268,9 +1302,12 @@ function Install-Global {
         }
     }
 
-    # Replace .gemini directory (backup → clear → copy entire folder)
-    Write-ColorOutput "Installing .gemini directory..." $ColorInfo
-    $geminiInstalled = Backup-AndReplaceDirectory -Source $sourceGeminiDir -Destination $globalGeminiDir -Description ".gemini directory" -BackupFolder $backupFolder
+    # Backup critical config files in .gemini directory before installation
+    Backup-CriticalConfigFiles -TargetDirectory $globalGeminiDir -BackupFolder $backupFolder -FileNames @("GEMINI.md", "CLAUDE.md")
+
+    # Merge .gemini directory (incremental overlay - preserves user files)
+    Write-ColorOutput "Installing .gemini directory (incremental merge)..." $ColorInfo
+    $geminiInstalled = Merge-DirectoryContents -Source $sourceGeminiDir -Destination $globalGeminiDir -Description ".gemini directory" -BackupFolder $backupFolder
 
     # Track .gemini directory in manifest
     if ($geminiInstalled) {
@@ -1283,9 +1320,12 @@ function Install-Global {
         }
     }
 
-    # Replace .qwen directory (backup → clear → copy entire folder)
-    Write-ColorOutput "Installing .qwen directory..." $ColorInfo
-    $qwenInstalled = Backup-AndReplaceDirectory -Source $sourceQwenDir -Destination $globalQwenDir -Description ".qwen directory" -BackupFolder $backupFolder
+    # Backup critical config files in .qwen directory before installation
+    Backup-CriticalConfigFiles -TargetDirectory $globalQwenDir -BackupFolder $backupFolder -FileNames @("QWEN.md")
+
+    # Merge .qwen directory (incremental overlay - preserves user files)
+    Write-ColorOutput "Installing .qwen directory (incremental merge)..." $ColorInfo
+    $qwenInstalled = Merge-DirectoryContents -Source $sourceQwenDir -Destination $globalQwenDir -Description ".qwen directory" -BackupFolder $backupFolder
 
     # Track .qwen directory in manifest
     if ($qwenInstalled) {
@@ -1372,9 +1412,9 @@ function Install-Path {
         $destFolderPath = Join-Path $localClaudeDir $folder
 
         if (Test-Path $sourceFolderPath) {
-            # Use new backup and replace logic for local folders
-            Write-ColorOutput "Installing local folder: $folder..." $ColorInfo
-            $folderInstalled = Backup-AndReplaceDirectory -Source $sourceFolderPath -Destination $destFolderPath -Description "$folder folder" -BackupFolder $backupFolder
+            # Use incremental merge for local folders (preserves user customizations)
+            Write-ColorOutput "Installing local folder: $folder (incremental merge)..." $ColorInfo
+            $folderInstalled = Merge-DirectoryContents -Source $sourceFolderPath -Destination $destFolderPath -Description "$folder folder" -BackupFolder $backupFolder
             Write-ColorOutput "Installed local folder: $folder" $ColorSuccess
 
             # Track local folder in manifest
@@ -1461,9 +1501,12 @@ function Install-Path {
         Add-ManifestEntry -Manifest $manifest -Path $globalClaudeMd -Type "File"
     }
 
-    # Replace .codex directory to local location (backup → clear → copy entire folder)
-    Write-ColorOutput "Installing .codex directory to local location..." $ColorInfo
-    $codexInstalled = Backup-AndReplaceDirectory -Source $sourceCodexDir -Destination $localCodexDir -Description ".codex directory" -BackupFolder $backupFolder
+    # Backup critical config files in .codex directory before installation
+    Backup-CriticalConfigFiles -TargetDirectory $localCodexDir -BackupFolder $backupFolder -FileNames @("AGENTS.md")
+
+    # Merge .codex directory to local location (incremental overlay - preserves user files)
+    Write-ColorOutput "Installing .codex directory to local location (incremental merge)..." $ColorInfo
+    $codexInstalled = Merge-DirectoryContents -Source $sourceCodexDir -Destination $localCodexDir -Description ".codex directory" -BackupFolder $backupFolder
 
     # Track .codex directory in manifest
     if ($codexInstalled) {
@@ -1476,9 +1519,12 @@ function Install-Path {
         }
     }
 
-    # Replace .gemini directory to local location (backup → clear → copy entire folder)
-    Write-ColorOutput "Installing .gemini directory to local location..." $ColorInfo
-    $geminiInstalled = Backup-AndReplaceDirectory -Source $sourceGeminiDir -Destination $localGeminiDir -Description ".gemini directory" -BackupFolder $backupFolder
+    # Backup critical config files in .gemini directory before installation
+    Backup-CriticalConfigFiles -TargetDirectory $localGeminiDir -BackupFolder $backupFolder -FileNames @("GEMINI.md", "CLAUDE.md")
+
+    # Merge .gemini directory to local location (incremental overlay - preserves user files)
+    Write-ColorOutput "Installing .gemini directory to local location (incremental merge)..." $ColorInfo
+    $geminiInstalled = Merge-DirectoryContents -Source $sourceGeminiDir -Destination $localGeminiDir -Description ".gemini directory" -BackupFolder $backupFolder
 
     # Track .gemini directory in manifest
     if ($geminiInstalled) {
@@ -1491,9 +1537,12 @@ function Install-Path {
         }
     }
 
-    # Replace .qwen directory to local location (backup → clear → copy entire folder)
-    Write-ColorOutput "Installing .qwen directory to local location..." $ColorInfo
-    $qwenInstalled = Backup-AndReplaceDirectory -Source $sourceQwenDir -Destination $localQwenDir -Description ".qwen directory" -BackupFolder $backupFolder
+    # Backup critical config files in .qwen directory before installation
+    Backup-CriticalConfigFiles -TargetDirectory $localQwenDir -BackupFolder $backupFolder -FileNames @("QWEN.md")
+
+    # Merge .qwen directory to local location (incremental overlay - preserves user files)
+    Write-ColorOutput "Installing .qwen directory to local location (incremental merge)..." $ColorInfo
+    $qwenInstalled = Merge-DirectoryContents -Source $sourceQwenDir -Destination $localQwenDir -Description ".qwen directory" -BackupFolder $backupFolder
 
     # Track .qwen directory in manifest
     if ($qwenInstalled) {
diff --git a/Install-Claude.sh b/Install-Claude.sh
index 37558570..5201cdc0 100644
--- a/Install-Claude.sh
+++ b/Install-Claude.sh
@@ -344,6 +344,36 @@ function copy_file_to_destination() {
     fi
 }
 
+function backup_critical_config_files() {
+    local target_directory="$1"
+    local backup_folder="$2"
+    shift 2
+    local file_names=("$@")
+
+    if [ "$NO_BACKUP" = true ] || [ -z "$backup_folder" ]; then
+        return 0
+    fi
+
+    if [ ! -d "$target_directory" ]; then
+        return 0
+    fi
+
+    local backed_up_count=0
+    for file_name in "${file_names[@]}"; do
+        local file_path="${target_directory}/${file_name}"
+        if [ -f "$file_path" ]; then
+            if backup_file_to_folder "$file_path" "$backup_folder"; then
+                write_color "Critical config backed up: $file_name" "$COLOR_SUCCESS"
+                ((backed_up_count++))
+            fi
+        fi
+    done
+
+    if [ "$backed_up_count" -gt 0 ]; then
+        write_color "Backed up $backed_up_count critical configuration file(s)" "$COLOR_INFO"
+    fi
+}
+
 function backup_and_replace_directory() {
     local source="$1"
     local destination="$2"
@@ -512,9 +542,9 @@ function install_global() {
         fi
     fi
 
-    # Replace .claude directory (backup → clear conflicting → copy)
-    write_color "Installing .claude directory..." "$COLOR_INFO"
-    if backup_and_replace_directory "$source_claude_dir" "$global_claude_dir" ".claude directory" "$backup_folder"; then
+    # Merge .claude directory (incremental overlay - preserves user files)
+    write_color "Installing .claude directory (incremental merge)..." "$COLOR_INFO"
+    if merge_directory_contents "$source_claude_dir" "$global_claude_dir" ".claude directory" "$backup_folder"; then
         # Track .claude directory in manifest
         add_manifest_entry "$manifest_file" "$global_claude_dir" "Directory"
 
@@ -533,9 +563,12 @@ function install_global() {
         add_manifest_entry "$manifest_file" "$global_claude_md" "File"
     fi
 
-    # Replace .codex directory (backup → clear conflicting → copy)
-    write_color "Installing .codex directory..." "$COLOR_INFO"
-    if backup_and_replace_directory "$source_codex_dir" "$global_codex_dir" ".codex directory" "$backup_folder"; then
+    # Backup critical config files in .codex directory before installation
+    backup_critical_config_files "$global_codex_dir" "$backup_folder" "AGENTS.md"
+
+    # Merge .codex directory (incremental overlay - preserves user files)
+    write_color "Installing .codex directory (incremental merge)..." "$COLOR_INFO"
+    if merge_directory_contents "$source_codex_dir" "$global_codex_dir" ".codex directory" "$backup_folder"; then
         # Track .codex directory in manifest
         add_manifest_entry "$manifest_file" "$global_codex_dir" "Directory"
 
@@ -547,9 +580,12 @@ function install_global() {
         done < <(find "$source_codex_dir" -type f -print0)
     fi
 
-    # Replace .gemini directory (backup → clear conflicting → copy)
-    write_color "Installing .gemini directory..." "$COLOR_INFO"
-    if backup_and_replace_directory "$source_gemini_dir" "$global_gemini_dir" ".gemini directory" "$backup_folder"; then
+    # Backup critical config files in .gemini directory before installation
+    backup_critical_config_files "$global_gemini_dir" "$backup_folder" "GEMINI.md" "CLAUDE.md"
+
+    # Merge .gemini directory (incremental overlay - preserves user files)
+    write_color "Installing .gemini directory (incremental merge)..." "$COLOR_INFO"
+    if merge_directory_contents "$source_gemini_dir" "$global_gemini_dir" ".gemini directory" "$backup_folder"; then
         # Track .gemini directory in manifest
         add_manifest_entry "$manifest_file" "$global_gemini_dir" "Directory"
 
@@ -561,9 +597,12 @@ function install_global() {
         done < <(find "$source_gemini_dir" -type f -print0)
     fi
 
-    # Replace .qwen directory (backup → clear conflicting → copy)
-    write_color "Installing .qwen directory..." "$COLOR_INFO"
-    if backup_and_replace_directory "$source_qwen_dir" "$global_qwen_dir" ".qwen directory" "$backup_folder"; then
+    # Backup critical config files in .qwen directory before installation
+    backup_critical_config_files "$global_qwen_dir" "$backup_folder" "QWEN.md"
+
+    # Merge .qwen directory (incremental overlay - preserves user files)
+    write_color "Installing .qwen directory (incremental merge)..." "$COLOR_INFO"
+    if merge_directory_contents "$source_qwen_dir" "$global_qwen_dir" ".qwen directory" "$backup_folder"; then
         # Track .qwen directory in manifest
         add_manifest_entry "$manifest_file" "$global_qwen_dir" "Directory"
 
@@ -642,9 +681,9 @@ function install_path() {
         local dest_folder="${local_claude_dir}/${folder}"
 
         if [ -d "$source_folder" ]; then
-            # Use new backup and replace logic for local folders
-            write_color "Installing local folder: $folder..." "$COLOR_INFO"
-            if backup_and_replace_directory "$source_folder" "$dest_folder" "$folder folder" "$backup_folder"; then
+            # Use incremental merge for local folders (preserves user customizations)
+            write_color "Installing local folder: $folder (incremental merge)..." "$COLOR_INFO"
+            if merge_directory_contents "$source_folder" "$dest_folder" "$folder folder" "$backup_folder"; then
                 # Track local folder in manifest
                 add_manifest_entry "$manifest_file" "$dest_folder" "Directory"
 
@@ -715,9 +754,12 @@ function install_path() {
         add_manifest_entry "$manifest_file" "$global_claude_md" "File"
     fi
 
-    # Replace .codex directory to local location (backup → clear conflicting → copy)
-    write_color "Installing .codex directory to local location..." "$COLOR_INFO"
-    if backup_and_replace_directory "$source_codex_dir" "$local_codex_dir" ".codex directory" "$backup_folder"; then
+    # Backup critical config files in .codex directory before installation
+    backup_critical_config_files "$local_codex_dir" "$backup_folder" "AGENTS.md"
+
+    # Merge .codex directory to local location (incremental overlay - preserves user files)
+    write_color "Installing .codex directory to local location (incremental merge)..." "$COLOR_INFO"
+    if merge_directory_contents "$source_codex_dir" "$local_codex_dir" ".codex directory" "$backup_folder"; then
         # Track .codex directory in manifest
         add_manifest_entry "$manifest_file" "$local_codex_dir" "Directory"
 
@@ -729,9 +771,12 @@ function install_path() {
         done < <(find "$source_codex_dir" -type f -print0)
     fi
 
-    # Replace .gemini directory to local location (backup → clear conflicting → copy)
-    write_color "Installing .gemini directory to local location..." "$COLOR_INFO"
-    if backup_and_replace_directory "$source_gemini_dir" "$local_gemini_dir" ".gemini directory" "$backup_folder"; then
+    # Backup critical config files in .gemini directory before installation
+    backup_critical_config_files "$local_gemini_dir" "$backup_folder" "GEMINI.md" "CLAUDE.md"
+
+    # Merge .gemini directory to local location (incremental overlay - preserves user files)
+    write_color "Installing .gemini directory to local location (incremental merge)..." "$COLOR_INFO"
+    if merge_directory_contents "$source_gemini_dir" "$local_gemini_dir" ".gemini directory" "$backup_folder"; then
         # Track .gemini directory in manifest
         add_manifest_entry "$manifest_file" "$local_gemini_dir" "Directory"
 
@@ -743,9 +788,12 @@ function install_path() {
         done < <(find "$source_gemini_dir" -type f -print0)
     fi
 
-    # Replace .qwen directory to local location (backup → clear conflicting → copy)
-    write_color "Installing .qwen directory to local location..." "$COLOR_INFO"
-    if backup_and_replace_directory "$source_qwen_dir" "$local_qwen_dir" ".qwen directory" "$backup_folder"; then
+    # Backup critical config files in .qwen directory before installation
+    backup_critical_config_files "$local_qwen_dir" "$backup_folder" "QWEN.md"
+
+    # Merge .qwen directory to local location (incremental overlay - preserves user files)
+    write_color "Installing .qwen directory to local location (incremental merge)..." "$COLOR_INFO"
+    if merge_directory_contents "$source_qwen_dir" "$local_qwen_dir" ".qwen directory" "$backup_folder"; then
         # Track .qwen directory in manifest
         add_manifest_entry "$manifest_file" "$local_qwen_dir" "Directory"