This script demonstrates the problem:

$haystack = "Line 1<BR>Line 2<BR>Line 3";
$result = str_replace("<BR>","\n",$haystack);
echo($result);

The output of this script is:

Line 1
Line 2

This is followed by about 65K of what appears to be random sections of memory as it contains swaths of unparsed PHP code and PHP-generated HTML from other scripts.

PHP is compiled as an Apache module.

I've also tested this script with PHP 3.0.7, compiled as CGI under Linux, with no problems.