When the cursor is inside a word and formatting (bold, superscript, etc.) is applied, the entire word is changed. How can I turn this off, so that when the cursor is inside a word and formatting is turned on, only new characters entered at that point have the formatting?
I don’t know of any trick to disable this feature. It is a real annoyance when reviewing text.
You have two options, but this requires leaving the keyboard for the mouse then back.
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when editing text (mostly no typing), select the sequence to emphasise then apply stylistic effects (character style, recommended, or direct formatiing with toolbar button or keyboard shortcut)
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when correcting text, type first a space (which the effect of artificially creating a new word break and start), strike the keyboard shortcut, type a character, move back, erase space, move forward and continue typing (a lot of fuss for a simple requirement!)
Since I am a strong advocate for styles – paragraph and character notably --, I warn you against any kind of direct formatting which will complicate your life afterwards. Always prefer a neat, clean formatting based on styles, not on toolbar buttons (or their menu/shortcut equivalences).