>> 7. Nothing happens because the region in step (1) has been lost.
>>     It should ask to replace 4 ‘_xx’s in the region.
>
> I suspect this is due to changes in how selection works in Emacs.
> Those changes were made in Emacs 24; please see the section "Selection
> changes" in the file etc/NEWS.24, where you will also find
> instructions for getting back the old behavior.

I tried to fix this problem by this patch, and indeed it fixed it,
so the region boundaries are preserved even when changed during
the minibuffer reading the strings: