We don’t normally use “worn” to refer to “facilities”. The words have similar meaning, but they take objects in the opposite order. For B to mean the same as A, we need to say: “I suggest replacing the run-down facilities with new ones.”

You should say "I suggest replacing the worn equipment with some new equipment." Notice the word order when using 'replace'. Replace is more permanent. Substitute is more temporary or for only one time. For example 'If you don't have any eggs right now, I suggest substituting apple sauce for eggs.' Notice the word order when using substitute. 'Facilities' are buildings, parts of buildings, or places. For example 'Our school has a gym facility and toilet facilities.' 'Workout facilities in a gym' is incorrect. Because the gym is a workout facility/building/place. 'Workout equipment/machines in a gym' is correct. Workout equipment include dumbbells and barbells etc. Workout machines include treadmills etc.

I agree that "worn" isn't a common description for facilities in terms of places. You could say machines/equipment is worn or highly used, especially referring to equipment in a gym. I can see where someone would say "our workout facilities need updated". "Facilities" can be used as a general term referring to things as part room/service [our kitchen facilities/gym facilities/etc] A : I suggest substituting some new facilities for the worn ones. - I would probably re-word this to say "We need update the facilities because they are highly used/outdated" or "We need to upgrade our facilities and substitute the worn equipment with new equipment" B : I suggest replacing some new facilities with the worn ones. - Using "with" in this order changes the meaning to [make the facilities worn], so I wouldn't use this.