SQL localdb instance not accessible after creation during install

I've got a windows service that creates a named sql localdb instance during installation. I execute commands as the local system account during installation and can create, info query, and start the instance. I'm creating it using a wix custom action run as the localsystem account, it kicks off without a hitch:

<!-- Custom action for creating a named localdb instance -->
<CustomAction Id="CA_SetPropertiesCreateLocalDbInstance" Property="CA_CreateLocalDbInstance" Value="InstanceName=MyLocalDbInstance" />
<CustomAction Id="CA_CreateLocalDbInstance" BinaryKey="BIN_CustomActions" DllEntry="CreateLocalDbInstance" Execute="deferred" Impersonate="no" Return="check" HideTarget="no" />

<!-- Schedule the Custom Actions -->
<InstallExecuteSequence>
    <Custom Action="CA_SetPropertiesCreateLocalDbInstance" Before="CA_CreateLocalDbInstance">NOT Installed</Custom>
    <Custom Action="CA_CreateLocalDbInstance" Before="InstallFinalize">NOT Installed</Custom>
</InstallExecuteSequence>

The logs from that custom action running during install:

Executing command 'sqllocaldb c MyLocalDbInstance'
command output>>    LocalDB instance "MyLocalDbInstance" created with version 14.0.3162.1.
command exit code>> 0
Executing command 'sqllocaldb s MyLocalDbInstance'
command output>>    LocalDB instance "MyLocalDbInstance" started.
command exit code>> 0
Executing command 'sqllocaldb i MyLocalDbInstance'
command output>>    Name:               MyLocalDbInstance
command output>>    Version:            14.0.3162.1
command output>>    Shared name:        
command output>>    Owner:              NT AUTHORITY\SYSTEM
command output>>    Auto-create:        No
command output>>    State:              Running
command output>>    Last start time:    8/8/2019 11:40:23 PM
command output>>    Instance pipe name: np:\\.\pipe\LOCALDB#3FB77699\tsql\query
command exit code>> 0

However, when I try and access the localdb instance during the application runtime, I get the error error: 50 - Local Database Runtime error occurred. The specified LocalDB instance does not exist.

If I use psexec.exe (MSFT tool for powershell) to run sqllocaldb queries as the localsystem account, I can see the localdb instance I created:

PS C:\WINDOWS\system32> whoami
nt authority\system
PS C:\WINDOWS\system32> sqllocaldb i
MSSQLLocalDB
MyLocalDbInstance

I can access info on the default instance no problem, but trying to query the instance created results in an error:

PS C:\WINDOWS\system32> sqllocaldb i MyLocalDbInstance
Printing of LocalDB instance "MyLocalDbInstance" information failed because of the following error:
LocalDB instance "MyLocalDbInstance" doesn't exist!

Interestingly, if I run "sqllocaldb c MyLocalDbInstance" again from the localsystem powershell instance, it creates a new instance. Subsequent executions of the "sqllocaldb c MyLocalDbInstance" command simply overwrite the newly created one:

PS C:\WINDOWS\system32> sqllocaldb c MyLocalDbInstance
LocalDB instance "MyLocalDbInstance" created with version 14.0.3162.1.
PS C:\WINDOWS\system32> sqllocaldb c MyLocalDbInstance
LocalDB instance "MyLocalDbInstance" created with version 14.0.3162.1.
PS C:\WINDOWS\system32> sqllocaldb i
MSSQLLocalDB
MyLocalDbInstance
MyLocalDbInstance

I'm pretty stumped, and am probably missing knowledge of one of the following to trace the issue:

-weird windows-user compartmentalization things preventing access

-internal complexities in sqllocaldb

-artefactual interactions with psexec.exe masking the real problem

My next debugging step is probably to make the instance "Shared" during installation, but that's undesirable for security reasons.

I can try and put up a dummy project with a dummy installer if anyone really wants to dig in.