This is not a bug.
I think there is a misunderstanding about how “Projects” work/do…
• “Projects” do not move and/or copy your images (Master or VC): when you put an image into a project, a “link” is made to the corresponding image, which belongs to a specific folder, somewhere on your computer.
• The same goes for VCs. If in a project you make 4 VCs, those 4 VCs are created into the image folder, while the project “only makes a link to them”.
• If you decide to delete all VCs for a given image (the Master) inside your project, only the links to the original VCs are deleted (the 4 VCs are still present in the original image folder). This is why in your project your image still show the “M” icon, because it’s a Master image with 4 VCs (but if you delete those 4 VCs from within the original folder, you’ll see that the “M” icon will disappear in your project…).