Blocks of {{code}} are acting strange

This is not related to the code macro. It behaves the same with any macro that is called inline (for those that support inline mode of course). And it's a bug in the standard CKEditor regarding how inline widgets are handled. We use CKEditor widgets to wrap and protect macro output. The problem can be reproduced with https://ckeditor.com/docs/ckeditor4/latest/examples/placeholder.html where placeholders are inline widgets.

My question for you is why do you have to use the code macro inline. You say "block of code" but that is not a block if you use it inline, between text. If code / syntax highlighting for those inline snippets is not critical then you could use instead the Typewriter style which generates the ##foo## syntax.