See your points. For this feature request, my real need is “word to phrase” but I agree - a separate fuzzy search general improvements suggestion would be good. I’ll see if I can find something that’s already been written, or start a meta-thread on it, because I feel there will be more than just this one thing that would be good to add.
Your #2, see the KM link I’ve added above. I’m playing currently with it and it’s very close: in short, it works exactly as intended if the note has an alias that matches your selected text (it’s inserting the alias as the link text):
If the word you’ve selected is not a alias, it works but you don’t get the link text:

