@ammar_siddiqui -
What happens if you remove the never drop assign1 from your rule? My first thought when I saw that was that was going to be the assignment that should be dropped. Your second picture shows that is not the case. I am wondering if that extra rule is causing an issue with what is being dropped. If so, then it is a bug that Instructure needs to be made aware of.
Everything looks good. I will set up a test case and try out a few things as well to see if I can duplicate what you see.
Ron
Edit: @ammar_siddiqui - I just duplicated your results by adding in the keep assignment 1. without always keep the assignment, it works fine. with it, it does not. I added a 4th assignment to see if it was always picking the last assignment. It then worked (or so I thought). I started playing around with the scores and it was sometimes correct and sometimes not.
There is definitely an issue there with the keep assignment selected. Also, I do not know if it is related to the percents as well. I checked with points and the same strange issues existed as well.
I tried again without the always keep function and ran into issues with it being correct as well with 4 assignments