i failed a course last semester. if i retake it over the summer, will the failed one count towards my GPA or cancel out?

Both will count, it will be an average between the failed mark and mark you get from retaking.

Should you pass in the summer, you will have passed the requirements on a pass fail basis. However the second course will add to your average. For example, your first mark will be a zero at 3 units and the second mark will be x at 3 units.

Overall it will be equivalent to mark x at 6 units

^^Mark x/2 at 6 units.

Otherwise, that's saying the mark obtained from the upgrade counts for that of two courses (which isn't right).