Hi Shankar, this is Bryll
Thank you for taking the time to write us in the Microsoft Community.
I have personally checked and researched extensively on the issue you have described with using backspace in deleting text in Microsoft Loop. After looking into it, we have arrived at the same outcome on our side. It shows that the continuous backspace is designed by default to remove the entire letters of a sentence, but good thing there is another way around it to use backspace without getting all letters in your sentence be deleted at once.
First: Point the mouse cursor after the text that you wish to remove then press Enter key once then do a backspace which should individually remove letters from your sentence.
Second: You can use your mouse cursor to highlight the letters or words you wish to remove before pressing backspace which allows to delete the highlighted letters or words only and not the entire sentence.
Additionally, to quickly obtain feature support, it is recommended that you could post your sincere suggestions or feedback on Loop · Community (microsoft.com) or Loop Built-in Feedback then share the feedback link which you post in a reply here for other users to raise their own votes. These are the official channels for sending feedback or suggestions to Microsoft developers.
You can also follow the Microsoft 365 blog and social media accounts for the latest news and updates on the product: Microsoft 365 Roadmap | Microsoft 365
I am honored to be part of this journey of yours.
Best regards,
Bryll
Community Moderator