Actually, just realized what was going on. It's not actually a bug, but rather working as intended.
When you spawn an object through an instance of another object, it automatically sets the "child" object's angle to the "parent" object's.
Set "Sprite3"'s hotspot in your cap to any location you want, off center (just to show you that it works properly is all). Then go to "Sprite3"'s Angle options and check Auto-mirror. It will spawn at the correct position.
No bugs, just hidden features that need to be accounted for. TL222012-02-26 00:36:54