This is intentional behaviour. The link button is meant to add a wikilink to some text, which isn't the same thing as making you navigate to a page when you click on an image. That's why the link button doesn't work when you just have an image selected, but that didn't happen since you also have some whitespace selected next to it.

Given that making a click on an image navigate to a page is only allowed for public domain images for licensing reasons, I am worried that implementing a feature for this would cause licence violations.