A, iron in oxygen combustion produces a substance, does not belong to the displacement reaction. Therefore, A is incorrect.
B, iron powder mixed with dilute sulfuric acid is flat, the solution turns light green, and gas is generated. It is a substitution reaction in which a simple substance reacts with a compound to generate another simple substance and another compound. Therefore, B is correct.
C, carbon monoxide contacts with hot copper oxide powder, and the powder turns red gradually, without the participation of simple substance, which does not belong to displacement reaction. Therefore, c is incorrect.
D, after hydrochloric acid is dropped into silver nitrate solution, white precipitate is generated, indicating that the reaction of the two compounds does not conform to the characteristics of displacement reaction, so it does not belong to displacement reaction. So d is incorrect.
So choose B.