The grammar is underspecified. The full grammar is more complex. I guess I need just remove the current version from docs. Now it is confusing indeed.

> Why is "c" not being replaced with "da"?

It is all about precedence. According to the discussion I think I've chosen a wrong one and it raises confusion. Current version of precedence table is this:

| 1 | Escaped characters | \<special character> | | 2 | Bracket expression | [] | | 3 | Grouping | () | | 4 | Single-character-ERE duplication | * + ? {m,n} | | 5 | Transduction | : | | 6 | Concatenation | . (implicit) | | 8 | Alternation | | |

So the ':' is stronger then '.' (implicit concatenation).