Sorry, but I'm an analog man in a digital world!
Before I begin, in order to register it required a version of iWeb. I clicked on 'About iWeb' and it came back with a window that called it iWeb with no number. Below iWeb it said version 3.0.4 (601) I keep all software updated and am running OSX Lion 10.7.3.
I followed your iWeb FAQ- Drop Down Menus (I think to the letter). Since you indicated the page should be publ;ished to a folder, I copied my page (published on an FTP site) to one that was by folder. I downloaded MassReplaceIt, and then used all of your stated settings. I know the menu worked because the sample did what it was supposed to do. I entered find: 'MenuGoesHere' and in replace, I cut and pasted the code.
It found the page correctly and when I previewed it, it showed in red exactly what I cut and pasted. I did the replace and the window showed that it replaced 1 file.
But when I look at the page, all I see is the text file MenuGoesHere. I've recopied the page back to the FTP site so that you can look at it.
The address is : http://www.protognosis.org/The_Protogno ... lcome.html