Version:           4.4 (using KDE KDE 3.4.0)
Installed from:    Gentoo Packages
Compiler:          GCC 3.3.5-20050130 
OS:                Linux

Steps to reproduce:
If I open a new file and write the following:
arrbbhddde

then, I can do a replace of "r" to a NULL or blank (nothing), to eliminate the r's, that is, I put "r" in the first field and leave the second one blank
that works, my new string is:
abbhddde

Now I replace the "h" by a "c" with the replace function, I get this string:
abbcddde

Fine, but now I want to replace again, the d's by a NULL character, so I put "d" in the first field of the replace form and I delete "c" from the second field, leaving it blank. I get the following:
abbcccce

(I should get abbce)

From now on, that kind of replacement wont work. Replacing for another non NULL character will work fine.