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))