Try changing something in the demo's test.vsh/test.fsh via an external editor, saving, and clicking on the demo window to reload changes.

See gifs in GMLive's update post for an example of this being used in a more "real" environment to live-update shaders:

https://yellowafterlife.itch.io/gamemaker-live/devlog/121625/1024-shader-reloading-beta-and-a-few-fixes

I bought and tried it out, starting with shader_replace_simple_demo.yyz.

I ran the project.

I clicked on the game window.

I selected "HLSLCompiler.exe" (note: the default file name in the open window is SLCompiler.exe so I can't just press Open  without selecting HLSLCompiler.exe first)

The gray-ish screen that follows the mouse is now a vertical line instead of a diagonal line.

I tried to update the shader myself. I opened the directory that obj_test output to my console in its create event:

2.2.4.366 C:\Users\bitla\AppData\Local\shader_replace_simple_demo\

I tried to edit fout.shader or vout.shader, clicking the game screen, and seeing if the effects took place. It did not.

Is my understanding of what the demo should be doing wrong?