There’s no glitch, but I understand the confusion. You’re just getting some of the options mixed up.
Go to Appearance > Theme Options > Content > Homepage > Homepage Content and select “Posts” — In WordPress when you designate a “Posts Page” this is now your homepage and what you perceive as your homepage is your “frontpage”. So, when you select a homepage layout under your Theme Options (as it explains in the description to the right of the option) this is being applied to your WordPress homepage, which in this case would be your posts page.
For reference, from your documentation:
There are two completely separate methods you can do to set the custom layout you’ve built as your homepage.
Method 1: Create your custom layout, apply it to a static page, and then assign that page as your static frontpage under Settings > Reading > Frontpage Displays.
Method 2: Under Settings > Reading > Frontpage Displays, select “your latest posts.” Create your custom layout. Then, go to Appearance > Theme Options > Content > Homepage, and select your new custom layout as the content for the homepage. If you’re using an element in your custom layout that uses post pagination, make sure you use this method.
And so you can see that the logic behind these options totally depends on the context in which you’re setting up your website. In your case, your frontpage/homepage layout is not listing out posts, and so the concept of applying a “frontpage” makes sense. However, with someone else, it might seem more logical to have Settings > Reading > Frontpage displays set to “your latest posts” and then use the option from the theme options page to a custom layout. Maybe their homepage layout has a slider followed by a paginated post list.
The main reason for all of this is that with WordPress, there is a weird quirk that when you have a static frontpage, you can’t have a pagination. Some say this is a bug, but others argue that if it is a static frontpage, why should it have to accommodate pagination?