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The display can take both the original and the replica.
You need to have the original in your inventory for the replica recipe to be available.
The staff can be enchanted and then reset by placing it back in the display you find it in. It also has the option to socket a gem into it using the Gem Socket Tool Kit found in the tower.
Having the staff in your inventory adds the "Recall to Karagas' Tower" spell to your spell list. The spell allows teleportation back to the tower entrance.