Linking via Block Reference (Block ID, Bookmark) is broken

Help
,
1

Steps to reproduce

Settings > Editor > Display > Strict line breaks : Disabled

In Live Preview, type the below into an note past the Frontmatter:

[[#^ref|Link]]

Text before
Source to reference ^ref
text to follow

Did you follow the troubleshooting guide? [Y/N]

Y

Expected result

The Link should take me to the referenced block, and the block should be highlighted

Actual result

Nothing happens

Environment

SYSTEM INFO:
Obsidian version: v1.11.7
Installer version: v1.6.7
Operating system: Windows 11 Pro 10.0.26200
Login status: not logged in
Language: en
Insider build toggle: off
Live preview: on
Base theme: adapt to system
Community theme: none
Snippets enabled: 0
Restricted mode: on

RECOMMENDATIONS:
none

Additional information

I suspect that the Markdown parser logic has changed to strict double line line breaks, because the following works, but in encapsulates the Text before:

[[#^ref|Link]]

Text before
Source to reference ^ref

text to follow

but this only highlights the source properly:

[[#^ref|Link]]

Text before

Source to reference ^ref

text to follow
2

This is not a bug.

A block reference should be placed AT THE END of a block.
A text block corresponds to a paragraph, generally separated from other blocks with blank line before/after (strict line break is different thing)

a block
of text

this
is a
block ^validref

another block

This is not a thing because is a is not block/paragraph.

a block
of text

this
is a ^invalidref
block 

another block