I can confirm this is still an issue on 1.21.4. This bug kills a lot of fun features that could be implemented with Text Displays. I’ve recently been trying to make “dyeable” item frames with Text Displays and it works when you first spawn a Text Display in, but if you leave the area and come back, then this bug occurs. I’ve attached two pictures, the first one is what it should look like and the second one is when this bug occurs.
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Can confirm in 1.21.4… 5 years later…