What to Expect -- Rail work on my intended path

Yes, not just an inference but a substitute connection will be set up, there will be buses to carry passengers from Neuhaus to Pegmitz, ie, Ersatzverkehr.

The next line says to check before the departure of your train your trip connections.

The last line says that the train between Neuhaus and Pegnitz has been taken out of service, ie no train service between these two places.

If you want to skip the replacement bus, specify a stopover in Bamberg with 0 time there. Then you will get an itinerary that goes Frankfurt Flughafen>Wuerzburg>Bamberg>Hof>Bad Steben. Takes a little longer and starts later unless you can get the 10:02 from Frankfurt Flughafen, Otherwise next connection is at 12:02.

I've had to take a replacement bus a few years ago on this route from Pegnitz to Nuremberg in August. Its no big deal.

Does this infer that there will be something like buses that carry passengers from Neuhaus(Pegnitz) to Pegnitz?

Yes, the bus waits for the train in Neuhaus and takes you back to the train in Pegnitz. The overall travel time will be a little longer, however, because the bus has to take a detour, as in the Pegnitz valley between Neuhaus and Pegnitz there is no road at all in places. Therefore, it might be worthwhile to simply wait for the next train (apparently only every second train is cancelled, i.e. there is one every two hours; there is work on the bridges, not on the tracks). After all, the train ride through the Pegnitz Valley is much nicer than the one on the road. In any case, you should check the connection the day before, because construction work also is postponed sometimes. Have a good trip!

Thanks for the responses!

PS. Please do not forget to carry a FFP2 mask. It is currently mandatory on all trains and because of the spread of the delta variant, that could still be the case in August.

We had this happen once, and found that the hard part was knowing where to find the bus (it was a regular city bus on a regular route). There was no signage (English or German) to direct us to the bus, and no English-speaking agents in the station. We did get some help from other travelers, but had some panicky moments. The bus took us to another town's rail station that bypassed the construction zone. Dont hesitate to ask other travelers for help.

the hard part was knowing where to find the bus

That will not be the problem with the "giant" station of Neuhaus. There will be just one bus waiting and it will display a sign "SEV" ("Schienenersatzverkehr") and / or "Pegnitz".
(BTW, in all likelyhood, it will be a bus not by the DB but by a local company).

Here you can search for the station map and the position of the SEV bus.

Thanks for the reminder on the FFP2 mask.

If you go to this webpage to look for schedules, you will see the information in English. I don't know if that will help you understand what is meant by a Schienen Ersatz Verkehr (SEV), but at least you will see the explanation in English.

If you follow the link given by SLA, above, you will see a station map of Bavaria. In case you don't know where Neuhaus (Pegnitz) is, find the hub at Nürnberg, then look to the northeast on the line to Bayreuth. Find the dot for Neuhaus and click on it to get the station layout.