I think this is intended functionality, but it’s causing a lot of extra pain that I want to post it anyway.
I’ve been largely working around this for years by merging layers before creating an animation from color cycling, but I found a workflow case where I can’t do that.
To replicate, mark any one palette entry as the transparent color. Make a layer that contains both that color, and palette entries that are part of an enabled color cycle.
Next, in the menu hit “Animation->Create from Color Cycling”. Say YES to all options. An animation will be created with an animation layer that has a unique palette (cycled) for each animation frame. However, in none of the animation frames will the transparent palette index be used as transparency, even if that palette index is not itself cycled and is constant.
In this example, the transparent color is palette entry 0 in all palettes of all frames and layers: 255,0,255 hot pink.