To clarify, they ARE set as a watcher, but for some reason still do not receive the notification e-mail.
My guess is that its an order of operations issue. Perhaps it is checking who is watching the issue to send notifications to before the step where it actually makes the new assignee watch the issue.
However it does work when re-assigning an existing issue, it both sets them as a watcher and sends them an e-mail properly. This is only a problem when creating a new issue and assigning it to someone in the same step.
While we really do appreciate the upgrades and fixes you all made to notifications, this one is frustrating. I'm having to retrain my brain now to do my bug creation process differently. Multiple bugs have gotten missed by the assignee in the past couple of days because of this. Thanks for pointing it out immediately Taron.