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Does this plugin modify the post content in the database?

No. The plugin filters post content on-the-fly.

Will this work for posts I wrote prior to installing this plugin?

Yes, if they include strings that you've now defined with links.

What post fields get handled by this plugin?

By default, the plugin filters the post content, post excerpt fields, widget text, and optionally comments and comment excerpts. You can use the 'c2c_linkify_text_filters' filter to modify that behavior (see Filters section).

How can I get text linkification to apply for custom fields (or something not linkified by default)?

You can add to the list of filters that get text linkified using something like this (added to your theme's functions.php file, for instance):

// Enable text linkification for custom fields
add_filter( 'c2c_linkify_text_filters', 'more_text_replacements' );
function more_text_replacements( $filters ) {
    $filters[] = 'the_meta'; // Here you could put in the name of any filter you want
    return $filters;
}

Is the plugin case sensitive?

By default, yes. There is a setting you can change to make it case insensitive. Or you can use the 'c2c_linkify_text_case_sensitive' filter (see Filters section).

What if the word or phrase is already linked in a post?

Already linked text will not get linked again by this plugin (regardless of what the link may be).