Thanks as always for the feedback. According to our tests Instancing mode isn't inherited by Style Linking. We used the V-Ray Mat.ID debug mode, to see what segments are instanced and got the following results
The top object has instancing disabled, and is linked with the one on the bottom.
Could you let us know a bit more about what you are trying to create with this feature so we can identify where the issue is, perhaps you have a simplified file to illustrate?
Many thanks again,