For the problem you encountered, we have also tested it on our side, we used the latest version of Word 16.45, we just created a new Word document and created a style for Paragraph and a style for character(just changed the font and font size). Then
we referred the steps you provided and created three paragraphs, we selected the whole three paragraphs and format with Note paragraph style, then selected the last word in each paragraph and changed the character style, we found the paragraph mark will not
be changed.
That is close to what I've done, except that I did not begin with a newly-created Word document. This is one that began life as a .docx created in Word Mac 2011. And, of course, you had different results
at the end (but do read to the end of my reply, where I report variations in my use cases).
At the same time, we have also checked Word Preferences and we found we have selected Include Paragraph mark when selecting paragraphs and Select entire word when selecting text.
I tried various combinations of those Preference settings and that did not change the behavior of the character selection. My Preferences are not set the same as yours.
Since the latest version of Office is 16.45, we’d suggest you update your Office to the latest version to check if the same problem will occur.
That is the version I'm on. I'm running as the first few days of a "30-day trial" of Office 365, and I have confirmed that is the version.
If you are using Big Sur, ...
I am not. I am running the current rev of Catalina (10.15.7).
If you are using Catalina, we’d suggest you try to remove folder : ~/Library/Containers/com.microsoft.Word(press
command +shift +G and enter the route to go the folder) to remove caches of the app and check the result.
I can try that and will report back in my next reply. But since this is one of the first things I'm trying in a brand new installation of Office 365 I'm not thinking that this will change the behaviors.
At the same time, to better understand your situation, could you provide the information below and we can do more tests?
- Could you provide the version of your Word? You can go to Word > About Word and provide the screenshot of it.

- May I know if all documents have the same problem?
Yes, this has been a problem with all documents and it has been happening since Word 2011/Mac. I was hoping to find it fixed in the latest Word.
- Could you provide the version of Mac OS?

A few words about the OS. I have partitioned the HD of my MacBook Air. Catalina is running on one partition. I have High Sierra (& Word 2011) on the other partition. To test the original (2011) Word behavior I need to reboot into
HighSierra and compare to that OS.
- We noticed that it became the hyperlink after formatting work, could you provide the detailed steps about how your create this new style?
I don't understand what you are saying. None of my styles turn into hyperlinks in this testing.
All my styles were created in Word 2011 years ago. I have modified the styles in Word 365 (e.g., to tweak some of the font and paragraph properties) but they all began life long, long ago.
I did observe one interesting variation in this testing that you can try to see if you can duplicate my results under very specific cases.
Use-case 1: Create a paragraph consisting of only ONE WORD -- i.e., no characters
before the word I'm selecting and no characters after the word (other than a blank space). Select the word (by double-clicking). Result: the character style has been applied to the word
and to the paragraph mark, apparently overriding the paragraph style. For example, if I select the entire paragraph (by putting the mouse in the left margin and highlighting the whole paragraph: the word and the paragraph mark) and
check the assigned style, it reflects the character style. If I then do a find/replace of the paragraph mark, using the advanced replace option to assign character-style "Default Paragraph Font" to the paragraph mark, the paragraph
style is restored.
Use-case 2: Create a paragraph of multiple words, assign the "Note" style to the paragraph, and select just the last word in this multi-word paragraph (by double-clicking) and style it the character style. Result: only the single
word is styled. The paragraph mark, as well as the other words of the paragraph, retain the styling of the paragraph.
Use-case 3: Create a multi-word paragraph, assign the paragraph style to the paragraph, select the final word and style it with the character style. (The paragraph style is retained.) Select
all the non-character-styled words & spaces of the paragraph (i.e., everything prior to the character-styled final word) and assign the character style. (The paragraph style is retained by the paragraph mark.)
Use-case 4: Create a multi-word paragraph, assign the paragraph style to the paragraph, select
all the content of the paragraph (words and spaces) -- taking care to exclude the paragraph mark from the selection -- and style it with the character style. (The paragraph mark takes on the character style.)
Observe: the problem happens only for the first and fourth use cases.
I am using a Shortcut Key that has been associated with each of the styles in this test to do the style assignments.