It appears that `query-replace' (or whatever this runs) does not  
properly match spaces in the search string with soft newlines. It  
should do that just like isearch does now.

I encountered this when I had `longlines-mode' turned on and tried to  
replace a string in the following line(s):

\item Adjoin: Combine the \slot{New Type} with the {\sc Context
Type}   according to one of the combinatorial rules.

Note that this is one paragraph, with a soft newline in between  
"Context" and "Type". To reproduce, enter it as one line and have  
longlines-mode turned on (perhaps adjusting fill-column) so that it  
breaks right there.

Then do M-% {\s Context Type} RET bar RET

The string will not be replaced.

This is with an up-to-date Emacs 22 CVS build.