There is no way any one with any common sense can think that this two-choice option (one is magic, one does what you would expect; which is which depends on time of day for many users) is better than a three-choice option where each choice does exactly what you'd expect.
Your whole objection here hinges on you coming to that realization during the day when it's already in light mode by default. The 99.9% likelihood of "When does a user decide to go looking for the dark/light settings?" is "when the current color != the color desired. For your above scenario you'd go in there the first time you used your word processor at night. You'd flip it exactly once, and it would do what you described you want - stay light forever.
Perhaps you're the kind of nerd like me who likes poking through and tweaking every available setting of an app proactively, just for fun... and I'd expect VS Code for instance, to be optimized for "us." But the vast majority of people would never go hunting for the setting to "make it always light" at the time when it's already light. The thesis here is that, for apps not designed for developers, it's probably more valuable to not have those who aren't nearly as expert have to wonder if they're picking the wrong choice by offering a third option.
In my experience, software that is designed to work only for the most average user ends up feeling terrible for most everybody, because most people deviate from the average in one way or another, at one time or another.
It feels especially bad when the software makes assumptions about what the user wants, to the point of including a button that doesn't always do the same thing when pressed, and which doesn't even tell the user it doesn't always do the same thing when pressed.
Just look at all the complaints Microsoft gets for the way Windows constantly reverts or ignores user settings.
Or the way it feels to google a very specific set of search terms, only to receive back 20 completely irrelevant listicles that answer a statistically more likely question you didn't ask.
The improvement for them is that when they get here and see "Dark, Light, System" with System selected, they wonder "What's System?" Is System important? Will I break something if I change it from System? Is this even the right setting or is this something else? If I want it changed back to Dark later, do I need to choose "System" or should I choose "Dark"? Will this have unexpected effects on my whole computer if I choose "System" in this webpage?
> including a button that doesn't always do the same thing when pressed
The non-engineer would say the "System" one "doesn't always do the same thing when pressed" and that the "Light" and "Dark" in the 2-way control absolutely always do the same (and desired) thing: Immediately change it to Light or Dark. The side-effect of saving it as an override is, to be fair, a guess at their intent, but it's a very good bet.