Thanks. I am finding that the behaviors are pretty inconsistent, and only after a few hours of playing around did I discover some consistency, but there are still random things going on. Here are my findings.
A few windows get a tab even if they are on their own (e.g. Excel), most do not (e.g. Sublime Text). For lack of a better name, let’s call applications of the former type ‘single tab applications’ and the latter, ‘multi-tab applications’.

When one single tab application is placed on top of another single tab application, there is a blue window and tab indicator when the windows are about to snap together saying “Insert into group here”.

This seems to work when the setting is to instantly group windows, as well as with a delay.
A different behavior happens if either or both windows are multi-tab applications . If I drag a single tab app onto a multi-tab app, sometimes I get a blue indicator, but it is different, see below. If I do the reverse, put a multi-tab app on a single tab app, there is no indicator at all, it is a guessing game when to let go of the mouse and hope the windows snap together, sometimes the blue indicator does not happen. The blue indicator never happens when I place a multi-tab app on another multi-tab app.

If the setting is not “instantly group windows” it is impossible to get two multi-tab applications to snap together.
With a delay, putting a single-tab app on a multi-tab app seems to work. But Putting a multi-tab app on a single-tab app does not work.
1.1 Summary
1. Single tab onto single tab
a. instant: usually works with blue “insert into group here” indicator
b. with delay: usually works with blue “insert into group here” indicator
2. Single tab onto multi-tab
a. instant: usually works with blue “add this window to the dragged group” indicator
b. with delay: usually works with blue “add this window to the dragged group” indicator
3. Multi-tab onto single tab
a. instant: no indicator, a bit of a guessing game, but can usually get it to work.
b. with delay: does not work at all
4. Multi-tab onto multi-tab
a. instant: no indicator, a bit of a guessing game, but can usually get it to work.
b. with delay: does not work at all
Putting this together and expressing it a bit more concisely:
1. Putting a multi-tab on either a single or multi tab
a. never works with a delay, only in instant mode
b. never has an indicator
2. Putting a single tab app on either a single or multi tab app
a. works with both instant and with delay
b. has a blue indicator, but that indicator differs when placing on a single vs. a multi tab.
Sometimes the single tab applications such as Excel, Powerpoint and File Explorer do not show up with a tab as a single window. It used to be (up until an hour ago or so) that they always showed up with a tab in a single window. I was going to make a video showing all of the above cases, but now I cannot do so because the ‘single tab’ applications do not have a tab when as a single window. Instead, they look like this:

When this happens, they operate exactly like all the other multi-tab applications. If I place one directly on top of the other, it might snap together and the tabs some back, but only when together. If I separate them again, the tabs disappear. This is all very mysterious. I wonder how much of it you can reproduce. See the following links for some of the videos I did create
1. This message in a Word file: Groupy Issues
2. SingleTabAppsLoseTabs
3. SingleTabAppsLoseTabs-Take1
4. SingleTabAppsNotAlwaysStartWithTabs
5. MultiTabAppsDoNotGroupWithDelay