I think the guilty here is "display" set on the mode flag. If you change it to "edit", everything should work fine. Is there a reason why you set it on "display"?
From docs, it states that when a button is clicked, form should switch to edit mode automatically, but I don't know exactly what this should mean... Actually, I don't know if the behavior you have shown is correct either... form should not swallow your text whatever mode you give it.
Anyway, that should fix your problem.
All the best
http://www.openacs.org/api-doc/proc-view?proc=ad_form&source_p=1
