I need an explanation on how something works with items and file versions...
Say I have a file that I check in, assign an item, and then release the item (REV 0 - Version 1). I then put the item into WIP, checkout the file, make a change, check the file back in, and update the item (REV 1 - Version 2). I then realize that this was all a mistake and I want to go back... so I use the option to Roll Back the lifecycle state change. This prompts me whether I want to "Create new file version for the associated file".... my question... why would I ever NOT want to toggle this on? I don't understand.
If I don't toggle this on the version of the file stays in the modified state even though the version of the file attached to the item is reverted back to the previous version. I now have a locked file in the wrong version... if I open it with Inventor it's not right and it can't be changed.
I can only think of one case where this toggle would be off and it requires the automatic revision bump to be turned off (ie. revision does not change when state changes from Released to WIP). I'll start with your example:
I have a file that I check in, assign an item, and then release the item (REV 0 - Version 1). I then put the item into WIP, checkout the file, make a change, check the file back in, and update the item (REV 0 - Version 2) **Notice that the rev hasn't automatically been changed. Then I try to change the revision to 1, but I make a mistake and change it to revision 2 (or any number higher than 1). Now I need to roll back the lifecycle state change to correct my mistake, but I don't want to create a new version of the file.
Hope this answers your question,
P.S. While implementing Vault at the company I work for, we turned off the automatic revision bump until everyone got familiar with lifecycle states. That way if an item was released by an inexperienced user and there were errors with that item that needed correction, we could move it to WIP, make the changes, and re-release it without bumping up the revision.