This content is being interpreted as a "complex transclusion". The explanation in T137942: Template + First paragraph treated like a complex transclusion might be relevant.

Note that many of the templates on beta are broken in that they have extra linebreaks. In general it is better to test with live templates, although in this case it is broken (differently) on live too:

After switching to visual the template has been expanded to editable text:

After switching back both the template and the expansion are in the source:

In T255740#6244596, @Esanders wrote:

Note that many of the templates on beta are broken in that they have extra linebreaks. In general it is better to test with live templates

Good call. Noted.

...in this case it is broken (differently) on live too:

After switching to visual the template has been expanded to editable text:

After switching back both the template and the expansion are in the source:

@Esanders is the scenario you uncovered above deserving of a new tasks or would it be best to repurpose this task to resolve it.[1]

1. I've reproduced the above here: https://en.wikipedia.org/w/index.php?title=User_talk%3APPelberg_%28WMF%29&type=revision&diff=964006022&oldid=960023714

Let's create two tasks as they may have different solutions.

In T255740#6248540, @Esanders wrote:

Let's create two tasks as they may have different solutions.

On it. Can you please give T256333 a read and edit it for accuracy and completeness?

This will be obsolete after T256150

In T255740#6259806, @Esanders wrote:

This will be obsolete after T256150

Considering the decision we made today to move forward with T256150 (for reasons explained in T256150#6265908), I am moving this to the backlog.