Using sed to replace two patterns within a larger pattern

It's actually quite simple with sed: if a line matches just copy it to the hold space then substitute the value.
On the la$t line exchange hold space and pattern space then check if the latter is empty. If it's not empty, it means the substitution was already made so nothing to do. If it's empty, that means no match was found so replace the pattern space with the desired variable=value then append to the current line in the hold buffer. Finally, exchange again:

sed '/^FOOBAR=/{h;s/=.*/=newvalue/};${x;/^$/{s//FOOBAR=newvalue/;H};x}' infile

The above is gnu sed syntax. Portable:

sed '/^FOOBAR=/{
h
s/=.*/=newvalue/
}
${
x
/^$/{
s//FOOBAR=newvalue/
H
}
x
}' infile

AWK answer

With your sample text in a file named sql, the following pattern (with line breaks and indentation for clarity):

awk -v skip=1 '{
    if (skip) { skip=0 }
    else {
        if (/FULLTEXT KEY/) { skip=1; sub(/,$/, "", prevline) }
        print prevline
    }
    prevline=$0
}
END { print prevline }' sql

produces:

CREATE TABLE `table` (
  `id` int(10) NOT NULL auto_increment,
  `name` varchar(100) NOT NULL default '',
  `description` text NOT NULL,
  PRIMARY KEY  (`id`)
) ENGINE=MyISAM DEFAULT CHARSET=latin1;
/*!40101 SET character_set_client = @saved_cs_client */;

Explanation:

• We implement "lookahead" by only printing the previously encountered line at every iteration, after inspecting the current line.
• If the current line contains the FULLTEXT KEY marker, we set a flag to skip printing this line during the next iteration. We also remove the trailing comma on the previous line that is about to be printed.
• We skip printing an empty initial line (before prevline has been set) by initially setting skip to 1 ("true").
• We make sure to print the last line by ending the script with an extra prevline print. Note that the current implementation assumes that this last line is not a line at risk of being skipped, i.e. that it does not contain the FULLTEXT KEY marker.

Original (incomplete) sed answer

This answer is incomplete and certainly in most cases incorrect, since sed will consume the input stream too quickly for the intended result when doing multiline matching -- as pointed out in the comments, it will only work for matches on even numbered rows! sed does not have "true" lookahead functionality, so we would be better off using Python/Perl/etc., or indeed AWK as above.

With your sample text in a file named sql, the following pattern:

$ sed 'N; s/,\n  FULLTEXT.*//' sql

produces:

CREATE TABLE `table` (
  `id` int(10) NOT NULL auto_increment,
  `name` varchar(100) NOT NULL default '',
  `description` text NOT NULL,
  PRIMARY KEY  (`id`)
) ENGINE=MyISAM DEFAULT CHARSET=latin1;
/*!40101 SET character_set_client = @saved_cs_client */;

Explanation:

• N enables multiline matching.
• \n represents a line break.
• s/pattern/replacement/ is the standard replacement syntax.
• .* will match anything to the end of the current line.