Bug in RegEx replace function

One of my customers just reported a strange problem with the RegEx replace function.

A simplified version of the problem is:

Search String:              (.*)
Replace expression:    $1xxx$1
Replace All

Input        Expected Result     Actual Result

c1             c1xxxc1                 c1xxxc1xxx
c2             c2xxxc2                 c2xxxc2xxx
c3             c3xxxc3                 c3xxxc3

If we change the Search string to (.+) it works as expected.
Or we can use (\w+) also... but not (\w*).

Is the '*' somehow matching the LineEnd characters also?
But if so, that should cause it to add additional line end characters, so that can't be it.

Note that this is a very simplified version of what the customer is actually trying to do.