I just came across an issue in another thread—for some reason the option that adds a “first-letter” class to a span doesn’t do so, it adds a “drop-cap” class to a span. I suspect you’re seeing something slightly different though, as you would have noticed that in the HTML.
In addition to the sample project provided above, here is another, where I described how to add drop caps as well.
Considering that this will be fixed at some point, I recommend using a .drop-cap, .first-letter {...} selector, for now.