Upon light debugging, it seems like the overrides depend on the name of the actors in the LI. The duplicated LI does have FLevelInstanceActorPropertyOverride but the Actor names were not updated updated when the LI was duplicated.
The cube in the duplicated instance will revert to the default material
There's no existing public thread on this issue, so head over to Questions & Answers just mention UE-353254 in the post.