Works fine for me in 12.0v4 and I use it frequently.
I suggest that you describe in more detail exactly how you used it and exactly how it failed. (BTW, bug reports should be posted in Report an Issue, but I suspect that this one is not due to a bug.)
Ok, I'll try to give as much detail as I can. Restarting didn't help.
My FM12 file uses 2 databases: one, _Images, which is used for importing folders of images; and two, _Data, a db with two tables, designdata and corefields. In Manage Database for "_Images" The relationships between the tables are working properly in all other respects.
I put my cursor in one of the fields in designdata, called Image Notes. I go to the menu item Records>Replace Field Contents. By default, the dialog box is selected to "Replace with: "xwz words...". I click "Replace" then browse to see the other 2 records in the found set do not have the text replaced.
That is the same procedure I have always used successfully. I've also tried pasting in new text as well as selecting all the text, and it also doesn't work.
I work on a MacBook Pro 2.4 gh with OS 10.8.4
Small edit: in the second line, the text "Manage Database for "_Images" was meant to be deleted. Ignore it.
And on what table is the layout where you tried this based? designdata or a related table?
If you create a small test file with a text field and a few records in one table, does replace field contents work in it?
If so, try running a recover on your file and then test out Replace Field Contents on the recovered copy. Does it work?
If that works, you may want to replace your file with a backup copy or to try rebuilding the index on the Image Notes field.