How to ignore case in String.replace

Use a regular expression:

var regex = new Regex( "camel", RegexOptions.IgnoreCase );
var newSentence = regex.Replace( sentence, "horse" );

Of course, this will also match words containing camel, but it’s not clear if you want that or not.

If you need exact matches you can use a custom MatchEvaluator.

public static class Evaluators
{
    public static string Wrap( Match m, string original, string format )
    {
        // doesn't match the entire string, otherwise it is a match
        if (m.Length != original.Length)
        {
            // has a preceding letter or digit (i.e., not a real match).
            if (m.Index != 0 && char.IsLetterOrDigit( original[m.Index - 1] ))
            {
                return m.Value;
            }
            // has a trailing letter or digit (i.e., not a real match).
            if (m.Index + m.Length != original.Length && char.IsLetterOrDigit( original[m.Index + m.Length] ))
            {
                return m.Value;
            }
        }
        // it is a match, apply the format
        return string.Format( format, m.Value );
    }
} 

Used with the previous example to wrap the match in a span as:

var regex = new Regex( highlightedWord, RegexOptions.IgnoreCase );
foreach (var sentence in sentences)
{
    var evaluator = new MatchEvaluator( match => Evaluators.Wrap( match, sentence, "<span class="red">{0}</span>" ) );
    Console.WriteLine( regex.Replace( sentence, evaluator ) );
}