step 2) I add one LAT (green) to the squad (this is not reconstitute squad but rather supplement squad) which, by 10.6, becomes a line 3 step squad;
step 3) promote 2 step to veteran (6XP) and I get 2vet+1ine -> a vet 3 step squad.
2 Vet + 1 line = 3 step Vet squad. So this is correct
b) what do I do with extra replacement...basically If I have less then 6 casualty, what do I do with the extra steps?
I believe unused replacement steps are lost as there is no place to put them.
Edit: pwned! At least my answers agree with the Designer's so thats a good thing!