If you would like to offer a patch for the user manual to explain this better, that would be great.

Thank you Simon for the invitation.

On further investigation https://gitlab.haskell.org/ghc/ghc/-/issues/20357, what I'd like the user manual to say is:

"InstanceSigs is a mis-feature. Don't use it. It is less confusing to just give no signature at all. If you really, really want to bind tyvars, use PatternSignatures."