A SQL Server user-defined scalar function that allows replacing character repetitions, between minimum and maximum occurrences.

-- use <database_name>;

if exists(select * from sysobjects where name = 'fn_smart_replace')
    begin
        drop function fn_smart_replace;
        print 'Success: UDF "fn_smart_replace" dropped.';
    end;
go

-- ================================================================================================
-- Name:         fn_smart_replace
-- Type:         User Defined Scalar-valued Function
-- Description:  Replace repeated sequences chars with length between a min and a max.
-- Dependencies: None
--
-- Parameters:   @string          = The string to perforn replace on.
--               @search_for      = The substring to search for repetitions and replace.
--               @replace_with    = The replacement value.
--               @min_replace_len = The min number of repetitions to replace.
--               @max_replace_len = The max number of repetions to replace.
--
-- Return Type:  nvarchar(4000)
--
-- Usage:        fn_smart_replace(@string, @search_for, @replace_with, @min_replace_len, @max_replace_len);
-- Example:      select dbo.fn_smart_replace('This is an example of repeeeeeeeated chars.', 'e', '', 2, 6);
-- ================================================================================================

create function fn_smart_replace(
    @string          nvarchar(4000),
    @search_for      nvarchar(4000),
    @replace_with    nvarchar(4000),

    @min_replace_len int = 1,
    @max_replace_len int = 4000
)
returns nvarchar(4000)
    with execute as caller
as
    begin
        declare @retval as nvarchar(4000);
        declare @n as int;

        set @retval = @string;

        -- check if valid parameters passed
        -- if not passthrough input value
        if len(isnull(@string, '')) = 0 or len(isnull(@search_for, '')) = 0
            begin
                goto FUNC_EXIT;
            end;

        if @min_replace_len < 0
            begin
                set @min_replace_len = 0
            end;

        if @max_replace_len < @min_replace_len
            begin
                set @max_replace_len = @min_replace_len
            end;

        set @n = @max_replace_len;

        while @n >= @min_replace_len
            begin
                set @retval = replace(@retval, replicate(@search_for, @n), @replace_with);
                set @retval = replace(@retval, replicate(@replace_with, 2), @replace_with);
                set @n = @n - 1;
            end;

        FUNC_EXIT:
        return @retval;
    end;
go

if exists(select * from sysobjects where type = 'FN'and name = 'fn_smart_replace')
    begin
        print 'Success: UDF "fn_smart_replace" created.';
    end;
else
    begin
        print 'Failed: Could not create UDF "fn_smart_replace".';
    end;
go