Related, The hightlighted text for the initial click loses its hightlight and, on the second click '''Bold text''' is inserted but "Bold text" remains hightlighted so subsequent clicks add "more" bold.

Same problem witnessed here:

What I did:

1. Mediawiki main page
2. I went to the page on "Phabricator" :)
3. Edit Source
4. Double clicked "Bold"

I got the same result as your picture.

Version: 1.25wmf11 (rMWcd2519e5227b)

Of course the default example text -- in this case the phrase 'Bold text' -- would be the target for bolding; no existing text was selected (highlighted) first.

1. Open any page
2. Type : This is a test sentence
3. highlight the word 'test' in the above sentence
4. click on the bold button in the toolbar

... and word ' test ' should then be wrapped by three hash marks on either side - causing test to be rendered bold when saved.
If you don't select some text before hitting the button for bold, you will always get the default example text (' Bold text ') instead.