1. What happened
Enabling "Normalize Blend Values" on a direct blend tree, does not normalize blend(s).

2. How we can reproduce it using the example you attached
Select the "AnimController" controller
In the Animator, enter the Blend Tree
you should see 3 motions assigned to the tree
the first set to 0
the second set to 0.5
the third set to 0
select the tree and press play in the Inspector preview... you should see half of the walk motion being applied, as expected.
Now, in the Inspector, enable "Normalize Blend Values"... the motion still represents half the walk motion, bad :(
expected result: The walk motion should be applied at 100% when normalized since the other motions are set to 0.