This has nothing to do with Auction Sniper; it is an eBay issue. In most cases, it is impossible to bid against yourself. AS only submits your bid to eBay; they handle the rest.
In your example, you would win the auction for $10. The other $2 would simply be your unused proxy bid, since there were no other bidders higher than $10. It is just like you had bid the $12 directly on eBay.
I am not sure what you mean by bidding to see if the current high bidder has a higher bid on file. Simply decide what your absolute maximum amount is and bid that through AS. This way your bid will go in at the last second and either you will win the auction as the highest bidder (giving others no real chance to respond), or you will not win because someone else bid higher. IMHO, it should not really matter what the other bidder's high bid is; simply decide on yours and let that bid work for you. If it is high enough, you will win; if not, then the item went for more than you were willing to spend, anyway.
It is, among other things, the indecisiveness of nibblers that we snipers seek to avoid. To me, that involves deciding a max, setting it, then walking away from it.