Would someone point me to some documentation that says when set -o emacs is active, a hash as the first character of a line is not a comment but is instead a search command?

I'm sorry, it sounds elementary and stupid, but ksh93u and ksh93u+m behave exactly the same on the Mac and both behave the same and do NOT do the same thing on a Linux VM with exactly the same rc files.

With no rc file at all they both still do it on the Mac. Two different Mac. Catalina 10.15.7.

[618] mbp13 $ ENV=/dev/null ksh
$ set -o emacs
$ history
51	exit
52	set
53	exit
54	set
55	# test
56	set -o emacs
57	set
58	/bin/ksh
59	set -o
60	set +o emacs
61	set -o emacs
62	#s
63	echo $HISTFILE
64	mg .kshrc
65	set -o emacs
66	history
$ #s
 1) set -o emacs
 2) set +o emacs
 3) set -o
 4) set

I typed #s at the prompt.

If the input is <space>#<some_text> , it's taken as a comment. If you type some text and then use ESC-# , the shell prepends a hash and moves to the next line. It adds that line to the history and if you bring it back with an up-arrow it tries to intrepret the hash as a search command again.

$ #this is a test     
 1) this is a test

It's not Terminal.app, iTerm2 does it too.