Fixed! In Kyma 7.06 (check your Help menu for software updates).
Turns out it was because the track volume control and the track's mute button had the same label name, so your fader was acting like a switch and would turn off for values less than 0.5. The labels were automatically generated (not your fault!)
We have disambiguated the names used by external MIDI controllers (like MotorMix) and OSC Devices so they will interact with the actual name of the EventValue (not necessarily the same as the label that appears in the VCS, since you have the option to change the widget labels to whatever you like).
Thanks for presenting such a clear example of this to help us finally track it down!