To recreate:
- have or create a valid hold
- check the item in, capture the hold
- confirm the hold shows as waiting for the patron
- set AllowHoldsOnDamagedItems to Don't Allow
- mark the item as damamged
- try to place another hold on this same bib for another patron of the same category, confirm that hold is no longer valid because the item is no longer considered valid
- check the item out to your original patron
- confirm the hold still shows as Waiting and no feedback is given as to why

I'd like Koha to simply mark that hold as filled -- if the library is doing the checkout, they likely want the hold filled. Alternatively, we should at least give an alert that mentions the hold and asks whether it should be filled, cancelled, or reverted.