When instantiating a prefab on the server, any child entity referenced by a component on the instance still has references to the child of the prefab, instead of the child entities in the newly created instance.
But this is only the case on the server, the client properly resolves the references to the instance children.
A use case where this is important is the custom parenting functionality.
We have a weapon that is parented to a weapon socket on the character.
We add a parent component to the weapon after it is spawned, with the weapon socket of the character (which is a child entity).
On the client, everything looks correct, but when instantiating bullets, the server parented the weapon to the prefab entity, instead of the instance of the character currently controlled by the player.
Yes, it was my mistake, I copied prefab values and overwrote only partially the values needed, and as it was only done on the server side, the client had the referenced child entities correctly resolved.