If a PC finds a Headband of Mental Prowess or the like and he already has ranks in the associated skill, can he "retrain" his original ranks into another skill, or does he just let them be overlapped? Verisimilitude ought to demand that if he lost the Headband later he wouldn't therefore be ignorant of something he knew before magical enhancement, but a player might feel the treasure unfairly robbed him of skill points.
They overlap. After all, headbands can be sundered or stolen.
No, they don't stack and they don't retrain (automatically).
Some DMs use the retraining rules from the 3.5 Player's Handbook II, which allows you (even without a headband) to retrain some class features each time you level up. Sometimes there are requirements, sometimes not - it's up to the DM (and it's an optional rule even in 3.5). If you use that retraining system, then supposedly your player might decide to retrain himself down to zero ranks in the headband skill and put those ranks somewhere else. That is entirely a DM Judgment Call whether he even wants to allow some optional 3.5 rule in his game in the first place.
Otherwise, the character is stuck with having some ranks in a skill that he doesn't need because his headband gives max ranks in that skill.
On the other hand, if the headband is lost, sold, whatever, then at least the character will still have his own ranks to fall back on. If htat seems counterintuitive, then don't think of it like the headband instantly teaches you to master the skill. Think of it like you don't learn anything new in the skill, but when you use it, you hear little whispering voices in your head telling you what to do so that you do it right, or maybe you just automatically do things that 'you didn't know you could do', or whatever. Then without the headband, those little voices (or that mysterious guidance) is gone, leaving you knowing just what you used to know - maybe with some amazing memories of doing things that, now, looking back without the headband, are just as mysterious to you as they would be to a non-skilled observer.