Always collapses the named bone, regardless of how it's used. Vertices or attachment points that are connected to the bone are reconnected to the bone's parent.
Note: The model builder will now allow the animator to change the bone hierarchy between animations, at least in the source. The hierarchy is unified into a single fixed hierarchy for playback, but it’s often easier to change this for certain hand animation tasks. The hierarchy is defined by the first instance of the parent->child relationship.