My issue was resolved with the help of Unity support. My sample code is fixed with these changes to the CoroutineRunner:

public static IEnumerator CoroutineRunner(IEnumerator enumerator, Action<Exception> onError, CancellationToken? cancellationToken = null)
{
while (true)
{
try
{
cancellationToken?.ThrowIfCancellationRequested();
bool hasNext = enumerator.MoveNext();
if (!hasNext) break;
}
catch (Exception ex)
{
onError(ex);
yield break;
}

if (enumerator.Current == null)
{
yield return null;
}
else
{
// Must call recursively to catch exceptions thrown by sub-coruoutines (IEnumerator returning functions).
IEnumerator currentEnum = enumerator.Current as IEnumerator;
if (currentEnum != null)
{
yield return IterateAndCallbackOnError(currentEnum, onError, cancellationToken);
}
// For everything else (e.g. YieldInstruction types), just yield on the enumerator.
else
{
yield return enumerator.Current;
}
}
}
}

I just discovered this issue with nested IEnumerator functions. We are using the established pattern of catching exceptions in coroutines. So this issue isn't just a testrunner issue. I'm on Unity 2021.2.6f1.

Here's a test class that shows the problem:

using System;
using System.Collections;
using System.Threading;
using UnityEngine;

public class TestClass : MonoBehaviour
{
private IEnumerator SubFunc_Throws()
{
yield return null;

throw new Exception("This won't be caught"); // This exception will not be caught since we're in a subfunction and stack is reset.
}

private IEnumerator SubFunc_NoThrows()
{
yield return null;
}

private IEnumerator PrimaryCoroutine_ThrowsBeforeSubFunc()
{
yield return null;

throw new Exception("This will be caught"); // This exception will be caught since we aren't in a subfunction.

// yield return SubFunc_Throws();
}

private IEnumerator PrimaryCoroutine_ThrowsAfterSubFunc()
{
yield return null;

yield return SubFunc_NoThrows();

throw new Exception("This will be caught"); // This exception will be caught since the stack is back to normal.
}

private IEnumerator PrimaryCoroutine_NoThrowsSubFuncThrows()
{
yield return null;

yield return SubFunc_Throws();
}

public static Coroutine StartCoroutineWithExceptionHandling(
MonoBehaviour monoBehaviour,
IEnumerator enumerator,
Action<Exception> onError,
CancellationToken? cancellationToken = null)
{
return monoBehaviour.StartCoroutine(CoroutineRunner(enumerator, onError, cancellationToken));
}

public static IEnumerator CoroutineRunner(IEnumerator enumerator, Action<Exception> onError, CancellationToken? cancellationToken = null)
{
while (true)
{
try
{
cancellationToken?.ThrowIfCancellationRequested();
bool hasNext = enumerator.MoveNext();
if (!hasNext) break;
}
catch (Exception ex)
{
onError(ex);
yield break;
}
yield return enumerator.Current;
}
}

public void Awake()
{
StartCoroutineWithExceptionHandling(this, PrimaryCoroutine_NoThrowsSubFuncThrows(), onError: (exception) =>
{
Debug.LogException(exception); // Won't get called
});

StartCoroutineWithExceptionHandling(this, PrimaryCoroutine_ThrowsBeforeSubFunc(), onError: (exception) =>
{
Debug.LogException(exception); // Will get called.
});

StartCoroutineWithExceptionHandling(this, PrimaryCoroutine_ThrowsAfterSubFunc(), onError: (exception) =>
{
Debug.LogException(exception); // Will get called.
});
}
}

Here's the cause (and a suggested fix) https://forum.unity.com/threads/bug-unity-test-runner-swallows-exceptions-from-child-coroutines.1037698/