Normalization will analyze Take/Item Properties Vol and will over-ride any adjustments made there, but it will not account for any changes you've made to the Item knob/handle.
Is this a bug? I believe so... but I can imagine that item knob/handles are intended to be post-normalization (not sure when that would be useful). This occurs with stock Reaper's Normalize Items action so it is not an SWS specific issue.
I'm guessing that your item knob/handle is > 0 before normalization, so that it's normalizing to a value above 0 (however much your knob was increased).