You will need to seperate items to do that, one to do the suppression and the formula to insert the desired text.
Its hard to say for sure without being able to see your report and run it. but it sounds like you are checking the isnull on the wrong value. It sounds like you are checking the formula and not the database field.
another way you could go about this is to put the isnull check into the selection export so that all the null fields don't get imported into the dataset the report is using at all.