Stax, 15 11 bytes
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Quick 'n' dirty approach. Working on improving it. Improved it!
Unpacked (13 bytes) and explanation
2:/8/{{[Im:bm 2:/ Split at index 2. Push head, then tail. 8/ Split into length-8 segments. { m Map block over each segment: { m Map block over each character: [ Copy first two elements (below) in-place. I Index of character in first two characters. :b Convert from binary. Implicit print as string.