Major In the edit form for the label feedback item (mod/feedback/item/label/label_form.php). The type for the html editor form element is set to PARAM_CLEANHTML. This is wrong. It should be PARAM_RAW. The cleaning of the html editor text is all done in the html editor libraries.
As it stands, it breaks the $CFG->enabletrusttext setting - setting that doesn't do anything in this case.
Additionally, at the end of the print_item() function in mod/feedback/item/label/lib.php the echo format_text(..) line is now wrong. I think it should read
echo format_text($output, FORMAT_HTML, array('overflowdiv'=>true, 'trusted'=>$CFG->enabletrusttext ));