Not sure about mod_mime's involvement
As I understand it, mod_mime is the one that actually processes the OutputFilter or InputFilter lines.
:: detour here to get a grip on the difference between AddBlahBlah/RemoveBlahBlah (mod_mime, requires an extension as third argument) and SetBlahBlah (core, no third argument) ::
mod_sed only gets involved if the specific filter is Sed. That's why it's important to find out if the server is willing to process both directives (AddInputFilter and AddOutputFilter) if mod_sed isn't involved. If yes, it's a mod_sed problem. If no, it's a mod_mime problem.
Did you at some point try putting both lines (Input and Output) into the
same envelope, whether Location or Directory? That's to eliminate the possibility that it's a core syntax issue. (Personally I'd stick with Directory, unless you've got a bunch of complicated aliasing, such that Location is the only way to be sure you're meeting all requests.)
Docs say "Status: Experimental" for mod_sed in its entirety. Now
there's a word you never want to see in official documentation ;) (It probably doesn't mean "experimental". It's probably got some arcane, technical, "Oh, that's all right then" meaning.)
A tutorial article on mod_sed, and why it is more powerful than simple string or regular expression search and replace
Really, this is getting more alarming by the minute.
This is all happening on an experimental site, right, not on your active production server? So we can continue trying things out without bringing everything crashing to the ground?
:: looking vaguely around for whitespace or someone like him ::