Thanks for posting this, and huge thanks for the detailed step-by-step! It’s a pleasure to bug hunt when the set-up is this detailed.
I’ve looked into it, and here’s what I found:
This is a good point. The fact that the formatting reverts to Heading 1, is because Papyrus Author does not save the formatting change, unless there’s an event like, for example, writing or pasting some text there.
If you paste/write some text after changing the text format, the formatting stays.
I’ll add it to our list of things to fix/address in the future.
I couldn’t reproduce this part. Is it possible you’ve closed the note in the Navigator, or de-selected the note, so it’s not visible for you?
Here’s a video of what I see, when I set up the document as you’ve described, and do the steps as described: