I suppose it is because of some of the "SMART" features of Word sometimes deleting spaces in front of paragraph marks can be confounding. This is exacerbated when dealing with the footnote storyrange because it is a Medusa in itself. You might try:
Code:
Sub ScratchMacro()
Selection.Find.Replacement.ClearFormatting
Dim oRng As Range
Set oRng = ActiveDocument.StoryRanges(wdFootnotesStory)
With oRng.Find
.ClearFormatting
.Text = " ^p"
While .Execute
oRng.Characters.First.Text = "~"
oRng.Characters.First.Delete
oRng.Collapse wdCollapseEnd
Wend
End With
lbl_Exit:
Exit Sub
End Sub