You mentioned you can only get it to update one specific record, and that actually sounds like you've got everything working already. I think the issue you're facing is that automations don't run on data that currently matches the trigger, and so if you want it to run on your existing data you'll need to change up your trigger and manipulate your data a bit, e.g. add a checkbox field and make the automation trigger when it's marked
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If this is a one off, I would suggest you create a formula field that checks whether that long text field has "L4_S2" via a `FIND()`, and if it does, outputs the text "L4_S2". After that, copy the values in that field and paste it into the single select field, which should do the same thing you're looking for without any automation runs?
As you've got different kinds of options in that single select field, you could chain "IF" statements so that your formula field basically looks exactly like your single select field, and once that's done just paste the formula field's data into the single select field