Yes it is active, asked for and recieved priority 100, and definately not just too slow. At one point I could even see it creating a child in the debugger, then assigning a villager to it, but then it would let the villager go and kill the child.
I am new to this AI stuff, so the aomdefaultaieconomy.xs has been my only source of information, but in my lack of understanding, I still very much wonder if there shouldn't be something in the "BuildSettlement" to tell the AI where it should build the new settlement (likely via a call to the findBestSettlement).