Looks like I missed a "Remark" in the user manual that states:
"If the SCTimer/PWM is operating as two 16-bit counters, events can only modify
the state of the outputs when neither counter is halted. This is true regardless of what
triggered the event."
Since I was depending on output changes to monitor the functioning of the timers, it appeared as a bug to me.
So much for the upper and lower timers being independent as claimed! It's simply not true.
I think this should have been made as a prominent warning in the manual instead of just one of thousands of "remarks" that I frankly don't have the time or patience to read through.
Anyway, apologies to anyone whose time I have wasted with this post.