The name of the option always_set_from_selected suggested it was automatic, but having had a chance to look at the PR code it appears to only happen on ctrl-f (or whatever the search shortcut is set to).
Correct, the update of "Search phrase:" with the selected text only happens on the "reopen" event of the already visible dialog initiated by using the shortcut or menu _Search > Find..._ or _Search > Replace..._
@etkaar also just noticed you made the changes in master, not in a branch, when you update can you please make the changes in a branch, that way committers can switch back from your changes to master or another set of changes easily.
Thanks for the note, I will try that!