I have a problem in word replacements as well. It is not getting replaced in all places. Tried replacing "contributions" with "donations". the change is not getting reflected in CiviReport, while in other places it has changed
The word replacement feature will only replace words that are part of the CiviCRM interface, and not words that are in your 'configuration'. This may not be at all obvious, but the key is that those occurrences of "Contribution" in the reports section are actually pre-configured report instances. So you can change them by going in and editing the reports (or rather, the report instances) themselves, via the web interface.
I should also say that you're probably working too hard to make it look 'right'. Although you may only use CiviContribute for donations now, you may end up wanting to use it for event registration in the future, for example.