Ok...there are two users (#1 and #2). Each has the "email notification" turned on and off in various configurations. The results are shown below:
1) User #1 OFF, User #2 OFF No emails received on either side for PMs received
2) User #1 ON, User #2 OFF User #2 gets email when User #1 sends PM. User #1 gets email when User #2 sends PM
3) User #1 OFF, User #2 ON User #2 gets email when User #1 sends PM. User #1 gets email when User #2 sends PM
4) User #1 ON, User #2 ON User #2 gets email when User #1 sends PM. User #1 gets email when User #2 sends PM
Note that #2 and #3 yielded the same results as #4.
I did some experiments, and it appears that this ONLY happens during a REPLY to a message. It does NOT happen during a NEW message, or a FORWARDED one. The system acts as expected during those scenarios. Only during REPLY's does it send if either end has emails activated.
That is what I have noticed as well on my forum. I just accepted this quirk, as I haven't had any time to hunt down this bug. It has been mentioned in one of the PM topics, but no fix was reported.