You don't need wildcards in the REPLACE
- it just finds the string you enter for the second argument, so the following should work:
UPDATE dbo.xxx
SET Value = REPLACE(Value, '123', '')
WHERE ID <=4
If the column to replace is type text
or ntext
you need to cast it to nvarchar
UPDATE dbo.xxx
SET Value = REPLACE(CAST(Value as nVarchar(4000)), '123', '')
WHERE ID <=4