In the code escaped characters are properly replaced correctly, but then overwritten again by the old content.
The corrected version should be like this:
int m = 0;
for (int i = 0; i < len; i++) { // Unpack buffer. Remove extra bytes.
if (packetBuffer[i] == 0x7D) { // escape control character
i++; // look at next character
if (packetBuffer[i] == 0x5E) { // this is 0x7E ^ 0x20, which is an escaped 0x7E
messageBuffer[m] = 0x7E;
Serial.print("Replaced ");Serial.print(packetBuffer[i],HEX);Serial.print(" with ");Serial.println(messageBuffer[m],HEX);
} else if (packetBuffer[i] == 0x5D) { // this is 0x7D ^ 0x20, which is an escaped 0x7D
messageBuffer[m] = 0x7D;
Serial.print("Replaced ");Serial.print(packetBuffer[i],HEX);Serial.print(" with ");Serial.println(messageBuffer[m],HEX);
}
} else { // all OTHER characters
messageBuffer[m] = packetBuffer[i]; // copy unescaped characters
}
m++;
}
len = m; // this is the new length of the message with escape symbols (0x7D) removed