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I've narrowed down a couple of issues.

It appears to be renaming words inside multi-line strings (using [[ ]]):

this=5
function that()
print("hi")
end
string=[[
this and that
]]

And ultra-compact mode appears to have difficulty with the short-hand "if" syntax:

function compare(n)
 if(n>10)return "big"
 return "small"
end
print("15 is "..compare(15))

wow, didn’t know about multi line string syntax. That going to be useful. I’ll look at trying to fix it.