I am sorry you have run into this issue. That particular bug has been fixed internally but not yet publicly released.
We discovered the problem with all of the Test-as-step steps being replaced was caused by an empty/corrupt .tstest file. Once that file is identified and deleted the problem with your Test-as-step steps should go away.
Scan your project for extra small .tstest files. Then look at its contents. If the contents look like what is shown in PITS Issue 11440 delete that file and it's associated files (.resx, .cs/.vb). Once that's done your project should work normally.
Please keep me updated with your progress to this problem.
All the best,
the Telerik team