I start a new empty project, add two flutes, and enter the following notes:
If I enable condensing after selecting the option to hide rests for the inactive player and label the active player, I get this:
Dorico gives me the result I expect in measure three but not in measure two. The presence of a second player label at the start of measure three suggests that Dorico changes its mind about how the music should be condensed in the middle of the phrase formed by the quarter notes.
The anomaly does not depend on having all three measures in the same system. Inserting any number of empty bars between measures one and two still causes the anomaly to occur.
Here is the Dorico project: Condensing Anomaly.dorico (386.5 KB)