Thanks! a mixture of both worked perfectly for me:
find $DIR -type f | while read file
cat $file | sed -e 's/'$IN_TXT'/'$OUT_TXT'/g' > $file
One other thing though, and sorry this is a bot off topic. There seems to be a limit on how much I can 'cat' ( 68 Kb ). Any way around this?
I'm going to start a new topic since so the information will be easier to find if other people have the same question.