So I'm writing my updater app to fix the image problem I outlined and saw I actually have a problem with the SQL I wrote anyways.  The replace error on an Ntext datatype would still happen, but even if that error wouldn't happen, another problem would have happened.

The problem of nothing actually happening.  I was replacing the same string with itself.  I needed the /image/ to reset the image tag back to the domain root.

The code SHOULD be:

begin tran
Update     subtext_Content
    Set    [text] = replace([text], '<img src="images/', '<img src="/images/')

select * from subtext_Content where [text] like '%<img src="images/%'