That could be - I'll do some more testing, just to be sure. I hadn't disabled that but was still having issues, however I did receive a mention alert for your mention here.
Alright, I logged into my test account, changed my settings to what yours were, to not receive alerts for replies to watched threads, watched this thread with my test account, mentioned my test account with this account, and...
Got the mention alert. So HOPEFULLY the tiny bit of tweaking with the permissions helped.