i2c backpacks on hd44780 displays is a bit of mess and you are stumbling into the heap.
The #1 issue is that there is no way to make a library "plug and play" since how the PCF8574 port pins are wired to the hd44780 pins is not standardized and there is no way for a library to reliably determine this information in cases.
This means that the library must know how these pins are wired. (which is done in etch in the PCB)
Some libraries hard code this information and a few allow the sketch to configure this information.
Compounding this is that there are multiple libraries with the same name.
The biggest issue with all this mess is that if the library information about how the PCF8574 is wired up to the HD44780 pins is incorrect, then the LCD won't display anything all.
You are actually quite lucky that it works at all given that this library hard codes the PCF8574 pin mapping.
You got lucky in that the library has a hard coded pin mapping that happens to match your i2c backpack.
i.e. if you buy another backpack there is no guarantee that it will work with this library.
And now back to your specific issue.
There are other additional complications on top of those mentioned above.
The core code included with the IDE was recently changed and that is why this particular library is not working correctly and only displaying a single character.
The library was always broken but the bug didn't happen to show up. When the IDE core code was updated, the bug finally showed up.
With respect to the library automatically being updated:
The IDE includes the ability to download, install, and receive updates for 3rd party libraries from github repositories.
For this library: "LiquidCrystal_I2C", there appears to be two choices.
The IDE was not supposed to allow this, but at least they apparently both point to the same library on github.
And while the author of the 3rd party library updated the code to fix this issue 4 months ago, he forgot to re-release it by tagging it.
So while it has been fixed, the fix is not available to the IDE library manager as the library manager looks for tags and the fixed version of the library code is not tagged.
I have prodded Marco, to re-tag it over on his github repo.
Hopefully, he will do that soon.
In the mean time, if you want it fixed you will need to fix it manually.
And keep in mind that with this library there is no guarantee that it will work with another i2c LCD backpack you purchase in the future since this library does not allow the sketch to configure the pin mappings.