Frost Blades: increase projectile damage does not affect DPS

Is it a bug or am I mistaken?

Increase Projectile Damage does not affect Frost Blades DPS.

Frost Blades is a skill that consists of two distinct, but connected mechanics.
The first is the long white spear-looking thing that occurs when you press your attack input. This component does melee, attack, and cold damage. It is not a projectile.
The second component happens after this initial "frost blade" hits an enemy. It will cause homing projectile attacks to fly out from whatever you've hit, only damaging other enemies.

Projectile damage only scales the projectile portion of the attack. The enemy you target (or the one that is hit by the first component of the skill) cannot be directly hit by the projectiles that come out of it (the shorter white shards), baring the projectile(s) chaining or returning back to you.

Because an enemy by default can only be hit by one portion of the skill, and in a fight against one target, they would only be hit by the melee part (as you can't spawn any projectiles by hitting nothing), projectile damage does not increase the tooltip dps - it would be misleading to the player as to what affects their single-target damage.
Likewise, the projectiles that fly out from whatever you hit are not scaled by melee damage modifiers.

Both however, are scaled by attack damage modifiers, as well as benefitting from cold and physical damage at a base level.

Read here for more information
https://pathofexile.gamepedia.com/Frost_Blades

This is also similar to the way that lightning strike and molten strike function.

If you were planning on playing the deadeye ascendancy and you got the node that caused projectiles to chain off of walls, a lone enemy could be hit by the projectile portion as well. (Your projectile damage still wouldn't modify your tooltip dps in this instance though).