Hi Livingdeadjedi,
I attempted to test with your assets and did not find any errors. I attempted 3 different tests: 1. One Material setup as your first material image with a material instance on the second mesh, 2. Two different materials (no material instances), one set up in the methods you show in both your images of materials, 3. material instances of those two images. In each scenario I saw no change in the look of the material. Below is the image of what I saw both in viewport and in the mesh editor:
