org-babel-expand-noweb-references in the current master branch ends with: (replace-regexp-in-string noweb-re (lambda...) body nil t 2)
I.e., the FIXEDCASE argument to replace-regexp-in-string is nil. This
has the effect that in
#+BEGIN_SRC elisp :noweb-ref AA
(ignore)
#+END_SRC
#+BEGIN_SRC elisp :noweb yes
<<AA>>
#+END_SRC
the second block is expanded as "(IGNORE)". That probably is a bug.
FIXEDCASE should be t.
