Title says it all, below the example:
Expected behavior? Suppressing playback on the grace slur doesn’t help.
Suppress Playback on the grace note slur works perfectly here.
Edit: @Janus was faster 
Suppressing the playback for the grace note slur reestablishes the whole legato, for me. Not sure if this was already discussed…:
So I’ll give you “works”, but perfectly is, in my case, disputable. I have a short cut to suppress playback. Using that to toggle the state, does nothing (most of the time). If I use the properties panel to toggle (switching back to key editor), it works all the time.
A bit baffling.
So the problem is the shortcut not the property. (Perhaps you should rename the thread title?)
Well, no, the problem is exactly as the title describes. The fact that the shortcut behavior is strangely different from the properties behavior is describing an anomaly with the work-around. I think the fundamental issue is that a grace slur shouldn’t cancel the legato technique.
Dorico cannot handle playback of nested slurs generally. The inner slur always overrides an outer one. I’d guess the reason being that the inner slur end turns the legato off and there is no way to turn it back on.
Yes, exactly. And chained slurs as well (which are internally probably seen as nested).
I guess it just needs a bit more love in this area.