Moderator Note
This also applies to solid blocks.
Any mob head/skull, even custom ones, can replace a non-solid block, entity or a block with a smaller hit box than a full block, when placed inside the occupying space. Those are buttons, lever, tripwire hook, trapdoor, doors, anvil, chests, fence/wall, fence gates, slabs, stairs, enchantment table, brewing stand, signs, ladder, flower pot, glass panes/iron bars (connected), etc. It can be done in all gamemodes. When a chest is replaced, all items (luckily) do drop out. This doesn't occur in 1.7.5.
Steps to reproduce:
-Place a fence or a lever on a ground or a wall.
-Grab a head and place it on the ground/wall where the object is placed.
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It's back in 1.7.10

Back/confirmed in 1.8, due to MC-72313.

Unable to reproduce. Is this a trick bug report? Tested in 1.8.1 Pre2. Only thing that heads can override is the Grass(Can walk threw type). I'm suspecting you must have brake the block, and placed the head, to make it look real, and was really fixed in 14w20a.

Unable to reproduce either in 1.8.1-pre2.