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I now know the following.

• "Reset all controllers on playback start" MUST be disabled. It can be disabled during an active session (no need to restart Qtractor). Once disabled, the automation track needs to have its MIDI output toggled back to master and then the MIDI output used for automation once.
• The automation track should be configured to transmit on a unique MIDI channel. This solves the conflict shown in the above screenshot and is most likely also needed to avoid other sensible race conditions.
• The target of the automation data should be set to receive on the same MIDI channel as the automation track.

The feature now works reliably within the running session.

What about across sessions?

Opening the session again results in the issue originally discussed where clips can not be selected. The automation track's output "toggle fix" can be used once to produce a working session.