OK, after a bit of experimentation, mystery solved, and its not me having a premature senior moment and forgetting how envelopes work. The answer is in a footnote on p129 of the manual (in the section on external triggers):
[QUOTE}
It is also possible to create a continuous note (hold) so that the Modular signal doesn’t stop. For this, set the “Release” knob on the VCA1 envelope fully to the right (in the direction of the hands of a clock).
[/QUOTE]
...Now, that sounds pretty much what you'd expect if you set the release time of an envelope to infinity. However, it turns out making this setting on either VCA1 or VCA2 overrides the "Release" setting on every envelope generator including VCA2 and all of the modulation envelopes - even if they are triggered by the sequencer.
To demonstrate the effect - load the preset "Trance" (which is an endlessly running sequence just gated by the keyboard via VCA1) and set the Release of VCA 2 to maximum - notice how it doesn't just keep the sequence playing but actually changes the envelope on the individual steps in the sequence - and VCA2 isn't even patched in to this preset, so its not that the mod envelopes were being "hidden" by the release on the VCA.
The solution is, of course, "Well, don't do that then!" - but if you don't know that its really confusing since maxing out the Release on the VCAs is a pretty obvious thing to do if you want to be able to hear the full cycle of your mod envelopes...