The Dismiss function removes the highlighting from the notifications, it doesn’t actually delete them, which is what you might expect. However, this is not a bug; it is how the Discourse software is intended to work. If you don’t see any highlighting on a particular notification, it means you either visited the thread, or you told the software you don’t intend to.
ETA: With your notification settings, I would expect none of those items to ever be highlighted, so the Dismiss button quite naturally will have no further effect.