Hi Chris,
Yes, you have discovered a bug in version 1.8.6 of the PixInsight core application. It happens on all platforms. Thank you for detecting and reporting it.
Bug description: When the profile mismatch policy is set to "Convert to the default profile" (and, with identical results, when the policy is "Ask what to do" and the user selects the option to convert to the default profile in the Profile Mismatch dialog), the profile conversion task, although is being reported on the console, is not applied to the image being loaded (it is applied by mistake to a temporary empty image structure that is discarded). As a result, the image is not converted to the default profile, although the default profile is (incorrectly, of course) assigned.
Workaround: Select the "Keep embedded profiles" profile mismatch policy in ColorManagementSetup, load the image with its original profile, and use the ICCProfileTransformation tool to perform the profile conversion. This tool works perfectly.
This is considered a critical, maximum priority bug, so I'll release a new version of PixInsight in the next days to fix it. I am sorry for the inconvenience.
This bug is particularly painful for me, since (besides this bug) I am proud of PixInsight's color management, which I am confident is one of the best and most efficient CM implementations available.