Looks like it just adds to existing enchantments. Tested, it increases the damage and to hit by +1. have not tried an upcast yet but we can probably guess the result.
Huh, you’re quite right of course. And that the Magic Weapon tooltip, while saying that the affected weapon “becomes” magical, implying that the weapon previously wasn’t, it doesn’t explicitly say it applies to non-magical weapons, and only gives the effects as +1 to attack and damage.
I wonder if this is indeed per design, though clearly not RAW. I’m not sure I’d have huge objections if so. It would clearly make the spell more useful, but given that it’s concentration based it doesn’t feel
too useful, given keeping it up would preclude use of other spells that the paladin might prefer to use such as command, compelled duel, searing smite, wrathful smite and branding smite.
I think I could be persuaded either way as to whether this bug/feature was desirable.