After a day of sitting the light appears to be functioning correctly now, so a rechargeable cell makes sense.
Curious how the circuit works on this because it functioned properly when shorted but not when the tailswitch was connected initially.
After further testing, I think I have the answer.
The tailcap switch is likely using a rechargeable battery - and one that must be fully charged for all the light output modes to work correctly. This rechargeable battery is recharged (slowly) when a AAA battery is inserted in the light and all contacts are made (i.e., even with the light off). Because the switch is electronic, there is a constant standby drain on the switch's rechargeable battery. Only with an AAA battery installed in the light is the rechargeable battery in the switch able to keep itself fully charged. In my testing to date, there is a fluctuating standby drain on the AAA battery when connected to the switch but not the head (typically ~2~30uA), which is presumably required to keep the switch rechargeable battery fully charged.
When the light is stored for a period of time with no AAA battery installed, the rechargeable switch battery slowly drops in charge (due to the electronic nature of the switch, with its own standby current draining its rechargeable battery). After ~4 days with no activity (and no AAA battery installed), I measured the initial standby drain when an AAA is re-installed at ~50uA. At this point, the Hi output level was significantly reduced: while Lo and Med were normal, Hi was ~45% of max output initially (although this recovered to ~55% of of max output after 1 minute of runtime).
Now, ~50uA standby is not enough on its own to explain that drop in output, so I can only presume it takes some time for the rechargeable battery to build up enough charge to allow all the modes to function properly. Note the light always functions properly if you short the base instead of using the tailcap - it is clearly the tailcap that is limiting max output. Based on anecdotal reports so far, it sounds like if you let the switch sit alone long enough, the Med and Lo modes could be affected - right down to the light not turning on at all. But if you let it sit for an hour with an AAA battery inside the light with all contacts made, that is enough time to fully recharge the switch rechargeable battery, and give you all modes again.
I'm still testing, but that's how it looks so far. :shrug: