The problem is not with the APC/SMF convert feature. It's main function as you say is for the APC part, but it also converts R1, R2 and Left during the convert process. It doesn't ignore those tracks.
Entering instrument changes on R1 using the instrument buttons directly when recording will put a "*" on R1 with the name of the instrument sound. APC/SMF will see that and carry it over in the convert process. Thus you will end up with the instrument changes on R1.
That's what's missing when panel memory is used. Panel memory does not carry the sounds to the R1 track. That means when the APC/SMF convert is used, it has no information on R1 and therefore does not make the instrument change.
I'm suggesting that Technics could improve this just by including the instrument sounds in R1 when a panel memory button is pressed. Ditto on R2 and Left by the way.
APC/SMF convert needs to see something to tell it to change the sound. Entering the sound directly does just that, but pressing a panel memory button, it doesn't.
Anthony