You need to remove the “replace”. Try:
env HUGO_MODULE_REPLACEMENTS='replace github.com/willfaught/paige -> paige' HUGO_THEMESDIR=../.. hugo server
On a related note, the above setting was added before Go got workspace support.
See https://github.com/gohugoio/hugoDocs/blob/master/hugo.work
As an example, when I do theme changes on the Hugo theme, I do this from the hugoDocs
repo:
HUGO_MODULE_WORKSPACE=hugo.work hugo server --ignoreVendorPaths "**"