I’m talking about how you have to “attention” your cursor to the Mixer OR the channel OR the Project Window OR… in Nuendo. It’s been a PITA ever since they abandoned the “all inclusive environment” from N6.5 and earlier. So, no, NOT the controller. This is a Nuendo issue (blamed on whatever Microsoft did to some version of Win. 7 and on).
It works great with the other commands. That single device is why I have such a problem with the pricing of controllers to begin with! Besides Faders, Pan and channel selection, the majority of functions in any DAW is KCs! That’s what made it possible for me to continue mixing on a desk for so long. It wasn’t until Euphonix started all of the in depth controls that I decided to just go ITB full time. I was expecting a “Mixer like experience.” I quickly learned that a serious premium was placed on that “one to one” ratio. The less the cost of the controller, the more menus you would have to endure. The X-keys module help me spread out those controls to an ALMOST ONE TO ONE RATIO along with the Artist Series gear. As I have repeatedly stated, if it weren’t for that “Mixer Mirroring” debacle of the hardware not following the DAW past the default setting, things could be pretty cool!
So here’s the deal. The KC works now and perhaps it always did and I just didn’t see it BECAUSE it only works on the Mixer Window! I was looking at the channel. I opened a channel. I added a couple of inserts. I then pressed the Bypass Inserts Button on my controller with the cursor hi-lighting the Insert slots section of my channel. NOTHING HAPPENS. I tried it again in the project window. I opened the insert slots, pressed the Bypass Button and, again, NOTHING.
Because Eucon will frequently drop the connection to the DAW or some Eucon KCs just won’t work (in which case, I’d write a command and use that, which worked fine) or any other number of unreliable irritants, I couldn’t be sure what the source of the problem might be. You said yours worked. So, I thought maybe it works for you because you’re in N7.1.4. But when I tried it in N8 and N7, I got the same results. 
Since ALL of the other KCs worked, I couldn’t get a handle on what was different UNTIL I noticed out the corner of my eye that the screen changed on my right monitor, which is where the mixer sits. I went over to the channel on the Mixer page (which means my cursor “attentioned” that specific window), pressed the Bypass button and it worked! It works in the only window I would never look at for this function!
If you’re working with inserts, you’re in channel view! Why they won’t have the KC work on the channel view or the channel view in the project window is beyond me. But that, apparently, is how it’s designed. So, for me, there’s no point in having that entire Bypass series of KCs if it will only work in the Mixer Window. I would NEVER get used to going there for that purpose.