To reproduce:
Note that the screen shot was added after point 2 in the empty space.
2 should read Add a note via the context menu - it needs no content it is to add note icon and highlighting. BUG: Note that the anchor name is compressed. Step 4 shows it correctly indicating that the timing of the conversion is incorrect.
2nd picture could not be added due to an formatting issue with Vanilla
NOTE: After three days of the behavior described above, the behavior has switched to the expected behavior. This happened when I entered 4 anchors on a note rather than the usual two for this project.