Update: Seriously beaten to the punch and the above answers are WAY better than mine. :)

Because the first sub is clobbering the second sub.

Check this out...

my $body = qq!<img border="0" src="/images/wink.gif" alt="Wink"> <img 
+border="0" src="/images/smiley.gif" alt="Smiley">!;
print "Inital Value\t $body\n";

$body =~ s/<img(.+?)="Smiley">/:)/g;
print "First Sub\t $body\n";

$body =~ s/<img(.+?)="Wink">/;)/g;
print "Second Sub\t $body\n";
[download]

Translating the first sub, ala Friedl:

find <img followed by one or more characters repeated zero or one times followed by ="Smiley"

So, it's being TOO greedy!

Cē