If you use drush sql-sync prod test then:
if you are located in the test directory, you get the confirm message:
You will destroy data in drupal-test and replace with data from drupal-test.
if you are located in the production directory, you get the confirm message:
You will destroy data in drupal and replace with data from drupal.

Testing shows that this is not just a message construction error - things work as stated. ie if located in the test directory drush sql-sync prod test simple backups up test and reloads it.

The workaround is not to use drush sql-sync but instead mysqlsump the drupal database and then use mysql to restore the dump file into drupal-test.

The drush version command says that we are running 5.8 and that 5.9 is available. I suspect that we should update first before looking for other reasons for the error. Note that the drush version command says:

drush version 5.8
A newer version of drush, 7.x-5.9, is available. You are currently running drush version 5.8. The update process depends on how you installed drush. Some common update commands are: `pear upgrade drush/drush`, `git pull`, `drush dl drush --destination=/path/to/drush`.