Seems to me it is behaving as-designed.
Let's say the embedded "--" string were to be removed from the /* -- */. If we wish to support the general case of mixed commenting styles in the same file, then there would be no way to revert that style of formatting and return the code to it's original state by changing the SQL Formatter settings. You might do it with the editor's Undo option, of course. Anyway, the formatter would be forced to leave any /* ... */ style comments untouched. Otherwise toggling the formatter setting could only support one commenting style in a file at a time.