Even when selecting no balance the recycling of intermediate products only works in the T3 factory.
I found this when using a bunch of mods and space age, the only one that changed the building was combat mechanics overhaul.
After selecting just base, factorio standard library and reverse factory the issue still occurs.
I was able to reproduce this with green circuits on a fresh map using cheats.

I completely forgot to add the check for removing the prod limitation. Of course, even after fixing that, I still have another set of logic that gates intermediates behind tier 2 machines, based on its subgroup name (basically which tab in the crafting menu it is). Changing the logic so that every item is recycleable at every tier would require somewhat more effort...

Intermediate recycling setting now works properly, allowing all tiers to recycle all items, like the description said. Fixed in v9.0.11