Yeah so I'm trying to see if there's something wrong with me maybe but in multiple save files I've been getting this bug to reoccur. I even added your mod to a vanilla run that I did and managed to breed H-Growlithe out of a female K-Arcanine and a Ditto. I even tried a mon you said worked as intended by giving myself two normal Yamask to breed and I got a Galar Yamask out of it. The only thing I can think of so far is that I've been using the debug menu to spawn in the pairs of mons to breed so maybe that does something.
I've since found that it also works at least on some other mons that have different forms. In particular, I managed to hatch a M-Mawile when breeding a regular Mawile and a Ditto.
Edit: Ok so I'm not sure how this is happening but every single mon I've breed ended up as form 001. So if a mon has another form like a mega then it'll end up being that form, but even mons that don't have forms seem to be changing to form 001 when I breed them. I'm still 70% sure it has something to do with the your mod but I honestly have no clue anymore. I could send the save file if you wanted.