Ah, I see. Didn't see you had filtered by author.
To sum it up and split some hairs:
1) The "quick search" (results that appear when simply typing in the bar) uses a completely different algorithm that doesn't respect your preference setting (even though the setting says it does), and is entirely useless.
2) The search itself (clicking "search") works, but when set to order by recent (or default, which is the same) and searching for topics, it will sort them by date of creation rather than last post.
3) NOT searching by thread title will return all posts that contain the words. This means it will not return posts in a topic that has the words in the title, unless the post itself also contains them.
4) This means there's no way to search for "latest updated thread with these words in its title", which would be the bread and butter of what most users search (and Google's algorithm is probably closer to this).