Make sure you only have 1 ArcRace1.lur in your Scripts.img.
I suggest using something other than IMG Tool 2.0 because that is meant for GTA. It still sorta works for Bully but there is other IMG tools specifically for Bully that may work better and don't require rebuilding. I prefer
IMG toolkit but
this IMG editor may be simpler. If you really want to use IMG Tool 2.0 that's fine, it's probably not what is causing the issue but still, those IMG tools I just gave you may work better for Bully specifically.
If it doesn't work and you're absolutely sure you replaced the scripts properly, try to move your entire Bully folder to your desktop and play it through there. I know that sounds weird but when Bully is in your Program Files the scripts behave weird. In my experience I've had problems with my Bully being in Program Files so I moved it somewhere else. For me, even deleting the Scripts.img and Scripts.dir would still load the default scripts, and it wouldn't work until I moved it to my desktop.