> Your line
>
> location \.(txt|css) {
>
> looks like a regex, but you're not telling nginx it /is/ a regex. I
> wouldn't expect anything to work until you fix that.

Apologies, that was a typo during simplification of my config. I do indeed have a ~ in my nested location block, and it's definitely matching correctly.

Everything else you've specified seems to fit my observed behaviour, so think it's just that my use case doesn't fit with the inheritance rules as they stand. Thanks for your help!