Yep, noticed same thing here and just saw this post as I was writing my own ahaha
Obsidian can update the display name if and only if the display name is the same as the file (this includes the extention) for example: [[Board.canvas|Board.canvas]] or that it doesn’t have a display name to begin with like: [[Board.canvas]] in which Obsidian will update the files and their names.
Hopefully this is fixed soon…