Steps to reproduce:
Create Module:Preprocess with the following content:
local p = {} function p.main(frame) return frame:preprocess(mw.text.unstripNoWiki(frame.args[1])) end return p
On a different page, write and preview the code {{#invoke:Preprocess|main|<nowiki>-{{{argname}}}</nowiki>}}.
Expected result: since the argname argument is not defined, the code returns -{{{argname}}} without any preprocessing.
Actual result: The argname template gets expanded inside the curly braces, resulting in -{<transclusion of Template:argname>}