Active menu item / category

Alas, this is a CSS issue, caused by some difference in WP’s classes applied. 🙂

First you are misinterpreting your “test” case 2:

  1. Dropdown isn’t highlighted because (despite what post body says) it’s not actually assigned the subcategory.
  2. The styling applied is from .current-menu-parent, since post is obviously not a term in taxonomy.

In your first case the class at work is .current-menu-item, since we are looking at the term in taxonomy. Next the CSS rules .current-menu-item a applies to all links inside of it and since dropdown HTML is inside top level item HTML it all gets styled as “current”.

You should be limiting such rules to immediately nested links inside container — .current-menu-item > a (which is already done correctly for .current-menu-parent > a).