Bug (?) with apex:actionSupport Containing apex:param

I'm encountering some unexpected behavior with apex:actionSupport and apex:param in what I thought would be a simple application.

I've created a demo of an apex:select with an apex:actionSupport component to illustrate the problem.  The source code for the demo is also available.

What I expected to happen:

1. Change the picklist value.
2. Observe that assignToColor matches picklistColor.
3. Observe that displayColor matches picklistColor.

What actually happens is that nothing changes except picklistColor.

Is this a bug or is this expected behavior?  I thought that apex:param could be used with apex:actionSupport components.