Transparent Background GIF issue

[Lonecel]

Hi all,
New to the forum and to using GIMP for gifs. 

I'm trying to make a gif with a transparent background, but even when I select [replace] the frames stack when the gif is played. 
I've unoptimized the gif/layers and spent over an hour looking online for a solution. 

I feel like I'm missing something simple. 

I attached a very simple file I've been using to try and sort the problem out. 

Thanks!