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I'd think this is rather a Cygwin bug than a Python bug.

Before the mount, /X/Y and /Z/Y refer to the same directory,
and on Unix they have the same device/inode combination. 
And that combination is the all-important factor when doing
a mount on that directory.
If you do this on Unix (I used an NFS mount instead of the
mount shown in the report), both /X/Y and /Z/Y contain the
mounted directory.