Just in case anyone finds this later, I found the solution here: https://www.reddit.com/r/mediawiki/comments/1axbuyh/problem_with_the_visual_editor/
Setting $wgUsePathInfo = true; in LocalSettings.php.
After updating from 1.39 to 1.42.3 all pages with categories have the same problem:
When I open the page in the Visual Editor the existing categories are shown in the category box at the bottom of the page as red links with these urls; Index.php?title=Category:category name].
If I leave it like that then after saving the page that url shows up at the bottom of the page text and the page no longer has any categories.
If I use the Source Editor instead everything is fine and the category shows up between double brackets.
The steps I took to update:
I uploaded the 1.42.3 zip to the server, had it unzipped to a new directory. I downloaded the latest versions for LabeledSectionTransclusion and Popups and uploaded those to the Extensions folder in the new directory.
I renamed the 1.39 folder to another name and then renamed the 1.42.3 folder to the regular wiki name. Then I ran the update script.
I opened the wiki main page and then saw I forgot to copy the images directory to the new folder, which is what I did next. I then reloaded the main page and everything looked fine.
The first time I edited a page I didn't notice the error at the bottom but after saving I saw what happened and from then on it became clear this is happening every time now.
I've tested by disabling all the extensions except for the editors to see if any of those could be the culprit but I keep getting the same issue.
These are the normally enabled extensions:
wfLoadExtension( 'CodeEditor' );
wfLoadExtension( 'LabeledSectionTransclusion' );
wfLoadExtension( 'PageImages' );
wfLoadExtension( 'ParserFunctions' );
wfLoadExtension( 'Popups' );
wfLoadExtension( 'TextExtracts' );
wfLoadExtension( 'VisualEditor' );
wfLoadExtension( 'WikiEditor' );
I did find the following in the release notes for 1.42:
ParserOutput::getCategories(), deprecated in 1.40, has been removed. You should use ::getCategoryNames() and ::getCategorySortKey() instead.
Maybe that is related but I don't understand how it could be as all the other extensions except for the two mentioned above come bundled with the latest version and should be compatible, one would think.
Could it be something needs to be added or removed from LocalSettings?
I'd love to know what the fix for this is as I used categories on all pages.
Thanks!