Translate replaces characters from the list with equivalent characters from the replace list, not the whole word. Tranwrd is the tool for replacing a whole text string with something else. Per the manual:
http://support.sas.com/documentation/cdl/en/lrdict/64316/HTML/default/viewer.htm#a000215153.htm
The prx is simply replacing the text string with the text string /n as you say, and that is correct. The /n means newline in some file formats,much like ^{newline} can be used in rtf code. Therefore the code is working, but your output renderer (rtf, pdf etc.) is either not setup to use the /n syntax, or its not valid for that renderer.
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