Should those ! be / That ! is alright. Perl allows that.

Could you explain the code for a sec.

$replace{$1} || $1
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This part helps you replace the matched string with itself in case %replace does not have corresponding key. For example,

Did not want to use some convoluted regexp
Trust me, this is a simple regex. It can get a lot worse, if you delve deeper :)

Want to learn the tehnique to do such list/hash substitutions as in original question
As far as searching and replacing in strings is concerned, I guess regexes would be most helpful.