Maybe this will help a little bit with what happens in the C1 case. This creates two small data sets and uses them on the set statement. In this case you see both sets of values from the two data sets. Your C1, reading the exact same data set reads the value into the exact same variables so it appears as though not much is going on.
data work.one;
input x $;
datalines;
a
b
c
d
;
data work.two;
input y $;
datalines;
z
y
x
w
;
data work.ex1;
set work.one;
set work.two;
run;
Perhaps more interesting is what happens if One and Two have different numbers of observations...
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