Does installing .NET 4.5 REALLY replace .NET 4.0 assemblies?

Yes, NET 4.5 is an in-place upgrade for .NET 4.0 which means that the CLR is the same but new libraries are added as well as bug fixes and performance improvements, and both of the are point to .NET CLR 4.

But, the .NET 4 libraries are actually not gone.

You still can find them in:

C:\Program Files (x86)\Reference Assemblies\Microsoft\Framework.NETFramework\v4.0

(Assume your os is 32bit)

With it, you can target safely against .NET 4 if you've installed .NET 4.5

Go here to find more info

Yes, .NET 4.5 is an in place upgrade, so it does replace the .NET 4.0 assemblies.

See this answer from Hans Passant explaining what the assemblies in the reference assemblies directory are for: Reference Assemblies folder and different assemblies with the same version.