Problem with replace function in postgres

Dear all -

I am having trouble with replace function inside a function.
If I do the same replace function outside it works fine, Following example
clearly explains my problem. Can you please help?

create table str_table
( mystr varchar(1000));
insert into str_table values ( 'This road is INDEFLY CLSD');

insert into str_table values('That is INDEFLY open');

insert into str_table values('That is a CLSD road');

select * from str_table;

create table lookup
( code varchar(100),
codeword varchar(100));

insert into lookup values( 'INDEFLY','indefinitely');

insert into lookup values( 'CLSD','closed');

select 'This road is INDEFLY CLSD', test_repl('This road is INDEFLY CLSD
INDEFLY') replaced_str
from str_table;

RESULT SET " This road is INDEFLY CLSD;This road is indefinitely closed
INDEFLY "

Regards