So while testing our upcoming forum, we noticed that all the emails the users received for their watched threads or conversations had links which were not clickable (Basically those in the red box below). So is this by design or is there a bug here.
I was thinking of the option in Admin CP - Options Basic Board Information - Board URL. I see at the bottom right of your screenshot it shows /community/index.php, but on my site it shows the full URL to my board. That is why I think you might have configured with a relative URL, but it should be full (http://www.yoursite.com/community)
It should not contain a trailing /, I did that when I originally set up my forum and that will also break your emails URLs