I don't see why this should be called a bug. The behaviour is exactly as it should be, although it is not achieved through NHoldRest, but through other means.
Why is it not achieved through NHoldRest? I don't know, but the most reasonable guess is that there are cases where a naïve use of NHoldRest would cause behaviour that seems unreasonable from a mathematical perspective. Let us try to find such a case.
It seems to me that the following would be such a case:
In[]:= N@Power[x, Power[2, y]]
Out[]= x^2.^y
More generally, Power[x, f[someExplicitNumber]] would be such a case, e.g. Power[x, Sin[2]].
Why treat Sin[2] differently from 2? Well, x^2 is x*x. The same is not valid for x^2.0. Thus there is value in retaining the exact 2 in x^2. More importantly, retaining integer powers in polynomial expression would seem essential.
What about rational powers? One would expect N@Sqrt[x] to stay Sqrt[x] and not turn into x^0.5.
The same does not apply to something like x^Sin[2].
