From question How to replace a character for a newline in Vim?. You have to use \\r when replacing text for a newline, like this
:%s/%/\\r/g
Another aspect to this is that \0, which is traditionally NULL, is taken in
s//\0/ to mean "the whole matched pattern". (Which, by the way, is redundant with, and longer than, &).
\0 to mean NULL, so you use \n\n to mean \n, so you use \r.\r to mean \r, but I don't know who would want to add that char on purpose.—☈