Let me explain 7b in more detail. If I blend david.png with chick.png, the output inherits the size of the base layer david.png. When I select new layer, it works as expected. See top thumbnail on the right panel: we can see a full alpha border.
If I do an in-place output, however, the alpha gets cropped on the right and the bottom.
In my opinion, the GIMP canvas shouldn’t change when the in-place output option is selected. If cropping is necessary, I would rather invoke the Fit Canvas to Layers command. In CLI, we wouldn’t have this problem because a canvas doesn’t exist. In-place and insertion result in the same output since each image in the list is separate.
PS ImageMagick does have a virtual canvas and its repage option can reset it. Perhaps we can do something similar in the plugin to manage the canvas in the GUI editor.