After a lot of back and forth with support we finally figured out why Infinity Scroll was not working on our main section pages:
"Blocks with infinity scroll enabled won't work with a dynamic setting (section tags set to 'Matches current URL or descendant'). There will need to be a hook set (setting a section, keyword, flag, etc.)."
This limitation does not appear to be documented anywhere at the present time.
This means Infinity Scroll will not work at all on the default Town News blocks that get assigned to every top level URL and all sub-sections (through inheritance) in the system. I assume most customers are using these across most areas of their sites.
Having to work around this will greatly increase the number of blocks needed for a site if they want to use Infinity Scroll on every section front. It could easily scale into the hundreds of blocks needed for a site. Then every time a style change is desired, such as showing the comment count in the summary block, it'll require editing each of those hundreds of blocks instead of the standard dynamic one.
Every single sub-section URL will need it's own block created instead of being able to inherit the blocks from the parent URL.
With this limitation Infinity Scroll is basically dead in the water for large scale deployment.
I really hope Town News is working to fix this but I wanted to post it here for wider awareness because before the answer came back the template developers I was told that there were other sites having the same trouble I was.
Customer support service by UserEcho