I disagree it was a bug, but rather an intentional design feature.
And yes, they have admitted it, and no, they have not removed it.
"Hello [Jan Hurst Nicholson],
I apologize for the inconvenience you have experienced.
Upon careful research, I can see that for your book "Something to Read on the Plane" has the follow KENPC page reads starting from June 19.
June 19 (Amazon.com) -4 page reads
June 20(Amazon.co.uk)-11 page reads
June 21(Amazon.co.uk)-91 page reads
I am sorry to inform that the pages viewed in Page Flip mode do not count toward pages read.
We do not see any material amount of reading happening within this feature, but we will continue to monitor it closely. As intended, we're seeing that customers use Page Flip to explore and navigate in books while automatically saving their place.
I appreciate your understanding on this regards.
Thanks for using Amazon KDP"
Bold added. Date: June 23, 2018
Their statement that they "do not see any material amount of reading happening within [Page Flip]" indicates they can see how many page reads are being read within Page Flip --they just aren't then reporting them to the authors and paying for them.
But oh, they appreciate our understanding of them not paying us as per our contracts' terms with them. But no worries, they are monitoring this closely --yeah, for two years, and countless author complaints.