Maybe the bug is not having blockquotes, something that people clearly want? We're seeing a desire path of feature use.

Maybe! I shouldn't have called user behavior a bug, and I'm sympathetic to the desire path argument, but it would hold more water if code-blocks-as-quotes didn't come with such an accessibility malus, especially given the common convention of indicating quoted content with >

I do want real blockquotes, but I can work around their lack.

> italic text with > prefix works quite well?

IMHO.