I have used order by Len(name) desc so that AA will come first, but since order by will apply atlast, it will not work.

One option I have in mind is to use a subquery like

Declare @tab Table(name varchar(10), value varchar(10))

Declare @mystring varchar(10)

set @mystring='AA'

insert into @tab

select * from (select 'A' Name , 1 Value

union

select 'AA',2) A order by LEN(name) desc

select @mystring=REPLACE(@mystring,name,value) from @tab

select @mystring

What you think?