I have been trying to use the "Replace Footage" command in the project panel with limited success.
I am either trying to replace a composition or a folder and it is usually greyed out. I can't seem to find rules on what I need to
do to use it. If anyone has any information I would greatly appreciate it.
Read the help! Compositions and (virtual) folders are not footage items, so there is nothing to replace. You can only replace a composition's usage in the timeline, which is a different thing. Folders inside are merely an organizational meta structure anmd have no relation to file system folders.