This is not a bug, it is an IK limitation.
If the IK mix is greater than zero and the parent IK bone has nonuniform local scale (meaning the X and Y scale have different values), then the child IK bone's local Y will snap to 0. Inheriting nonuniform scale does not trigger this snapping.
Spine's IK is the only I've ever seen that allows nonuniform scale at all. It was a very complex problem to solve and requires the child bone Y to be zero.
Your knee turning problem is not very clear to me. I saw your video above, but I'm not sure what you wanted by translating the child bone. Form your image it looks like you want the bones to bend the other way? Maybe you can animate the IK mix to zero, placing the FK bones so the leg is straight when the mix is zero, then flip the IK bend direction and animate the IK mix back to 100%.