s///; returns the string sent to it if no substitutions actually happened.

You might try something like this:

#!usr/bin/perl -w
use strict;

my $page2 = '';
while( <DATA> ){
    if( s!<title>(.*)</title>!<li>A$1C</li>!gi ){
        $page2 .= $_;
    }
}
print $page2;

__DATA__
<title>first story</title>
This story is short.
<title>second story</title>
This story is longer. But not much longer.
[download]

I used a ! instead of the / as the delimiters, so I could leave the literal slashes alone in the regex.