Skip Assigning Gamepad to Player 1 does not work

This is a regression from a long while ago that needs to get fixed

1. Open the Lyra local multiplayer map
2. Plug in one controller 
3. Open the level blueprint and call "Create Local Player" with a value of -1
4. Enable the Skip Assigning Gamepad to Player 1 setting in the project settings
5. PIE
6. Notice that you have two players, but cannot control the blue one with keyboard or mouse.

Expected: the Keyboard/Mouse controls the first (red) player, and the controller handles the second (blue) player.