What I think it's doing is quantizing the note lengths to the nearest setting you have, and in your case Dave, it appears to have done that.
If you snap the notes you show, to a 1/32nd grid, the tails will end on a 1/32nd grid line.
It appears that quantizing to specific length doesn't simply make the notes a specific length, but instead to the nearest setting.
EDIT: Aah I see Dstruct posted while I was testing.