Sane merge behavior for non-KRM files

[bgrant0607]

Related to #2350, #3118, #3119, #3210, #3242, #3329, and other merge/update-related issues.

We expect non-KRM files in packages. We need to merge those at least as well as git does.

[yuwenma]

Some updates: we did POC about same-merge behavior of non-KRM files Demo1: drive.google.com/file/d/1BMYH3HcTzUcnSTk0iO0oO_O4O_RiUhF7/view The graph below explains the high level workflow, more context can be found in the CUJ and strawman doc