Can ArcaOS (Blue Lion) be used as a Windows replacement?

Generally, no.

ArcaOS (Blue Lion) is meant to be a replacement for an existing OS/2 or eComStation installation or where a customer desires to switch away from Windows, Linux, Mac, or some other platform. While Blue Lion fully supports running 16-bit MS Windows applications, we realize that these are becoming scarce, and that modern Windows apps are fully 32 or 64-bit (such as would run natively under Windows XP, Vista, 7, 8, or 10).

With the use of Odin32, ArcaOS has some limited ability to run select 32-bit Windows applications, and with the use of VirtualBox running on ArcaOS, it is possible to run an entirely virtualized modern Windows implementation, however neither of these solutions is a true replacement for Windows running on bare metal or on a dedicated hypervisor, such as VMWare.

It should also be noted that ArcaOS is a 32-bit operating system.