I’m still in act 1 and I’ve got several items with rune mark on them. At crafting menu’s rune section it lets me select item to enchant. I select an item and then it lets me insert a rune to extract the properties of it, but when I press extract I hear cling sound and rune goes back to my inventory instead of the item. This keeps happening with every rune and every item so far. What is going on? Too low level item or rune? Wrong rune for that item? Need to progress further in main quest?

oh no
you do it right, it's just that "extract" means extracting the rune from the slot, you can insert and extract them at will, they are not destroyed upon taking them out, as soon as you put them on, they are effective, although not very important on the first act since they add dmg multiplicatively so at first act it'll add 2/3 dmg (can be worth to triggers elemental combos though)

Then this feature is bugged too :/

Seems like I cannot use runes at all then :(
My experience with this game hasn't been great, its like playing an early access game.

i don't think you understood, when you click on : extract, you take the rune OFF.
that's why when you click on extract, it goes bak to your inventory.