Dynamic repeatable character replacement

Sometime you need to eliminate duplicated char in string. Static replacement like

SET @Output_String=REPLACE(@teststring,'__','++')

is good for not big and predictable values. But what if you need to change replaced chars dynamically or its quantity is big enough?
In that case you can use dynamic replacement. Here is an example:

SET @Output_String=REPLACE(@teststring,'__','++')

DECLARE @Duplicate NVARCHAR(100)= '#$'
DECLARE @TestString NVARCHAR(MAX)= 'test_test__f##f2$$g'
DECLARE @Replacement NVARCHAR(MAX)= ''
DECLARE @OutputString NVARCHAR(MAX)= @teststring ;
WITH    numbers
          AS ( SELECT   ROW_NUMBER() OVER ( ORDER BY o.object_id, o2.object_id ) Number
               FROM     sys.objects o
                        CROSS JOIN sys.objects o2
             ),
        chars
          AS ( SELECT   SUBSTRING(@Duplicate, 1, 1) CHAR ,
                        CAST(1 AS INT) [LEVEL]
               UNION ALL
               SELECT   SUBSTRING(@Duplicate, numbers.Number, 1) CHAR ,
                        CAST(numbers.Number AS INT) [LEVEL]
               FROM     numbers
                        JOIN chars ON chars.Level + 1 = numbers.Number
               WHERE    LEN(SUBSTRING(@Duplicate, numbers.Number, 1)) > 0
             ),
        Replicated
          AS ( SELECT   REPLICATE(CHAR, numbers.number) Repl ,
                        numbers.Number
               FROM     chars
                        CROSS JOIN numbers
             )
    SELECT  @OutputString = REPLACE(@OutputString, Repl, @Replacement)
    FROM    replicated
    WHERE   number <= LEN(@TestString)

SELECT  @OutputString

You can modify @Duplicate string which is storage for replaced characters. Also @Replacements is a string which will be inserted instead of duplicated chars