> So you can still see the actual text that you're editing

But you're not editing that text! You're editing some other text and see a bunch of asterisks all over the place. And this is especially bad in nested styles - try some colored bold word in a table cell - without hiding the markup you'll basically lose most of visibility into the text/table layout

> to reduce ambiguity

it does the opposite, you can't easily distinguish between an asterisk and an asterisk, which is... ambiguity

> can't distinguish between adding more bold text to currently bold text or adding non-bold text immediately

Sure you can. In a well-designed editor you'll see the style indicator right near your caret is so it's always obvious whether and how your typed text is styled or not.

In a not-so-well-designed editor you'll get that indicator far away from your caret or just get asterisks appearing when you need them.

In a not-designed editor you'll see them all the time even when they don't serve any purpose.