"Highlight" is one of the options in Word's Replace function. Replace...format...highlight
This will replace each block of highlighted text with the replacement text. I.e. it would replace the capitals in "scraTCHmychin" (if they were highlighted) with a single x. If you want to replace each letter with a corresponding one then I don't know how to do that.
The highlighting will remain. If you don't want that you can use "no highlight" in the replace box.