WP_nav_menu fallback not working

You’ve not added a fallback_cb key to the argument array. You also need to add a theme_location key:

php start $menu = wp_nav_menu(
   array(
      'menu_class' => 'reset sf-menu',
      'container_id'=>'nav',
      'echo'=>0,
      'fallback_cb' => 'mytheme_fallback_function' // ADD ME!!!
      'theme_location' => `location_name` // ADD ME, AS DEFINED IN register_nav_menu()
   )
);

$menu = str_replace("\n", "", $menu);
$menu = str_replace("\r", "", $menu);
$menu = str_replace("\t", "", $menu);
echo $menu;
php end

Alternately, you could wrap your code in an if ( has_nav_menu( 'location_name' ) ) conditional:

if ( has_nav_menu( 'location_name' ) ) {
    echo $menu;
} else {
    // Do something else, like wp_list_pages() or wp_page_menu()
}