1. What happened
The support to have Unity continue to render the application when HolographicSpace.UserPresence = PresentPassive *and* RunInBackground = 0 broke.

This was correctly working 2018.4.8 but seems to have have been broken in 2018.4.16 (I didn't test any builds in between so the regression might have been in earlier releases).

2018.4.16 did fix the issue where the app wasn't correctly getting Application.Paused events when the user explicitly exists out of the Unity applications (when RunInBackground = 0), so I suspect that's when the regression got introduced.

2. How we can reproduce it using the example you attached
Repro steps:
1. Build and deploy the attached project
2. Bring up the Start menu and tap on the 'Settings' application

[Expected]
The unity app will continue to be rendered along side the Settings application. We would receive the OnApplicationFocus = false event.

[Actual]
The unity app got paused -- we received the OnApplicationPause = true and OnApplicationFocus = false.

Note that if the above has been fixed, we also need to make sure this other scenario works:
1. Build and deploy the attached project
2. Bring up the Start menu and tap on the 'home' icon at the bottom of the Start panel

[Expected]
The unity app got paused -- we received the OnApplicationPause = true and OnApplicationFocus = false.