I'm not sure Teej. It's easily within the 2C discharge capability of the cells. My guess is that it's an over voltage protection mode of some type.
Indeed, the output level is "Mid" as verified by the light meter. 400L
It blinks 3-4 times at start up and then runs unregulated as the voltage decreases, also verified by the light meter.
I could really care less that it doesn't run them properly because to me it's a bonus that it even runs them at all. Typically we complain when certain CR123 lights don't run 18650's.
My impression is that the 123's can't handle high draws. Obviously, an individual light's circuitry can do things to compensate for that, taking advantage of the doubled voltage, etc...or by cutting it off to PROTECT it from the doubled voltage.
So a light may run on a fail-soft mode...so at least there's SOME light, etc....but unless its MADE to take the added voltage AND doesn't draw to hard, for too long...123's in a light not meant for them can lead to bad things, or dim things, etc.
IE: The 123 might deliver for a bit, but then run out of the juice needed to MAINTAIN that high a draw.
I have plenty of lights that use 123's and deliver high lumen output, but they are designed to be able to do it. Heck, I can make my XT11 a few hundred lumens brighter if I use two RCR123's instead of one 18650....but it might only run for 30 minutes on high or so before kicking down to medium, etc.
On the one 18650, it can run on high for over two and a half hours.