Events not registering after replaceWith

Because when you replace the original element, events bound to it are removed. You’ll need to re-attach the click event handler on original after the call to replacement.replaceWith(original):

$(function() 
{   
   function replace() 
   {
      var replacement = $(document.createElement('span'));
      var original = $(this).replaceWith(replacement);

      replacement
         .css('background-color', 'green')
         .text('replacement for ' + $(this).text())
         .click(function() 
         {
            replacement.replaceWith(original);
            original.click(replace);
         });
   }

   $('.x').click(replace);
});