Note names are not shown in the piano roll editor by default, so this behavior, while not great, is not a high priority to fix (meaning we won't hold up the 5.20 release for it).
The "key" checkbox means "snap to key" in both the notation editor and the piano roll. The key snapping can be overridden with a mouse modifier (shift+control+alt+drag by default).
The piano roll editor doesn't have any concept of "now we are in this key" independent of the snap-to-key checkbox. We can certainly change things so that a key signature entered via the notation editor will carry over to the piano roll and affect how individual note names are displayed, regardless of whether snap-to-key is enabled or not. But like I said, we won't hold up the 5.20 release for this change.
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