It’s not about the display column — it’s about what is selected in your Column 1 and Column 2.
Column 1 is a lookup column where you select row references. You don’t select specifically the letter A or B or C — you select “Row with ID=1 from table First”, “Row with ID=2 from table First” etc. When you change the value of its display column (or designate another column as the display column), the labels in those reference chips get updated, but the references themselves remain the same.
Column 2 is a select list of literal values. The value each cell of this column holds is just a text value that’s not linked to anything — it’s basically copied at the moment of selection. The “Selectable items” setting controls what is shown in the selection list when you open that dropdown list, and that’s it — after you select a value in that dropdown list, it’s just copied in the cell in the form it was in that list at the moment.
P.S. It’s not that Lookup and Select behave differently — no, actually you can set “First” (not First.Col) as Selectable Items setting, and the Select will behave just like Lookup: you’ll be picking a row reference from a dropdown list, and the chip would show the actual display column value. It’s not about column type — it’s about what kind of value you select in that column.