If you select text in a command prompt, the running application will be blocked from updating the command prompt. Since the Bedrock server updates the command prompt on join, it can't accept the join while text is selected in the command prompt. It is likely that AutoCompaction will also be blocked while text is selected.
Typing (or pressing Esc) will clear text selection.
I am having the issue with names displaying as iterations of "Steve" as well. However, the locally defined skin (through Character Creator) is preserved on the server and displayed correctly to other clients connected to the server.
Using Bedrock Server 1.14.60.5 on Windows 10, connecting with clients on Windows 10.
This issue seemed not to occur until after I logged in and out with XBox account on Windows 10, while I was trying to figure out how intercepting DNS would work to allow a Switch to connect to the LAN server.
Resolved for me with the latest version.