I think I found the root cause of the bug, the held state does indeed stay on whilst keeping your finger on it but the palm rejection letting go often cancels the held state. It doesn't happen every single time but about 30% of the time for me and quite frequently when actually drawing as well.
Easiest way to force it to happen is to hold the button with my left thumb and then press my right pinky and hand palm on the display (making sure it has a large surface area touching it) and let it go again about a second later. If I don't even touch the display with my right hand (thus only hovering above the display and only letting the Apple Pencil touch it) then the held state stays on as long as I have my finger on the button.
Would love to see an update fix this bug as I doubt this would be something intended to happen. For reference, I'm using the latest version of the app, the latest version of iOS and have a 6th gen 12.9 iPad Pro