I just tried it and it works for me.
Just for a test I created a new project, imported an mpeg, made a subclip, deleted the original file from the project (after removing it from the timeline) clicked on the the subclip in the Project files and then went to CLIP>EDIT SUBCLIP, I checked off the box to generate a master file and it worked fine.
BUT I didn’t notice at first that it did work because the name of the master became the name of the subclip and, the subclip I placed in a sequence to see how long it was, did not change. when I dragged the file into a timeline I could see that it was master length.
Maybe it did work on yours and you didn’t notice because the name didn’t restore to the master clip name and/or you did what I did, expect the subclip on the timeline to automatically update.
