Replication between two databases on the same instance? Not sure why you'd want to do that, but collation doesn't prevent that, or any other SQL feature from working.
You can have 2 tables in the same DB with different collations. Hell, you can have 2 columns in the same table with different collations.
Gail Shaw
Microsoft Certified Master: SQL Server, MVP, M.Sc (Comp Sci)
SQL In The Wild: Discussions on DB performance with occasional diversions into recoverability