Very good question.

I didn't know about those cases. I only can consider those cases, which are mentioned as examples.

Update: Here's an update, so it should consider that special case you mentioned. But I had to change the code and remove (r)index.

#!/usr/bin/perl
use strict;
use warnings;

open SEQ,  '<', 'data1.dat' or die $!;
open MASK, '<', 'data2.dat' or die $!;

while ( my $seq = <SEQ> ) {
  my $mask = <MASK>;

  while ( $mask =~ m/(N+)/g ) {
    my $length = length $1;
    my $start  = pos($mask) - $length;

    my $lc_seq = lc substr( $seq, $start, $length );

    substr( $seq, $start, $length, $lc_seq );
  }
  
  print $seq;
}

close MASK;
close SEQ;
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