To get the match that you're looking for, use the "+" instead of the "*":

s/o+/e/;
[download]

will turn "goodwood" into "gedwood" (only the first occurrence is replaced); "+" refers to "one or more". To replace all occurrences of "o+" in the string, use the "g" modifier as well:

s/o+/e/g;
[download]

will turn "goodwood" into "gedwed".