Alright, I want to make a video response, and I'll be sure to credit you guys. But is this a simple yet effective explanation (so most people understand)?:
So, basically, both blocks went the same height because more energy was lost in the first impact. No matter how where you hit the block, there will be an equal amount of upward force. When the bullet hit in the middle, most of the kinetic energy is lost due to sound, heat and friction. This is because the center of mass was where the bullet was shot, so the block had to stay straight when the bullet made contact. This meant the bullet could lodge itself deep inside the block without the block moving out of its way. This compression and splitting of the block used a lot of the bullet’s kinetic energy. But, when the bullet hit the side of the block, the block rotated slightly, since the center of mass was not where the bullet was shot. This meant the bullet could only lodge itself so deep before the block rotated too much for the bullet. Therefore the kinetic energy that was previously used to lodge itself deep inside the block was now used to rotate the block. This allows both blocks to reach the same height, with the same amount of energy.