Why does wix burn not extract embedded packages on bundle upgrade? (Failed to find payload)

I have a bundle "v1" with an embedded MSI package that installs successfully.

And I have an upgraded bundle "v2" with an upgraded embedded MSI package.

When I run the v2 bundle, detect works - the DetectRelatedBundle and DetectRelatedMsiPackage events fire in my MBA. The log shows:

Detected related bundle: {1c1bc2f5-5b4e-4121-947a-1d39b58f13ad}, type: Upgrade, scope: PerMachine, version: 3.0.13.19491, operation: MajorUpgrade
Detected related package: {9C57A868-B899-46C2-A281-5D3EFFA0260B}, scope: PerMachine, version: 1.0.0.18095, language: 0 operation: MajorUpgrade
Detected package: MyPackage.msi, state: Absent, cached: None
Detect complete, result: 0x0

I call Engine.Plan(LaunghAction.Install). The log shows:

Plan begin, 1 package, action: Install
Planned package: MyPackage.msi, state: Absent, default requested: Present, ba requested: Present, execute: Install, rollback: Uninstall, cache: Yes, uncache: No, dependency: Register
Planned related bundle: {1c1bc2f5-5b4e-4121-947a-1d39b58f13ad}, type: Upgrade, default requested: Absent, ba requested: Absent, execute: Uninstall, rollback: Install, dependency: None
Plan complete, result: 0x0

I call Engine.Apply(). The install fails because Burn never extracts my embedded MSI package from the bundle exe. The log shows:

Error 0x80070002: Failed to find payload: MyPackage.msi in working path: C:\Windows\Temp\{B6E80008-0BDD-4B30-8863-345CA2FD8BDB}\MyPackage.msi and unverified path: C:\ProgramData\Package Cache\.unverified\MyPackage.msi
Error 0x80070002: Failed to cache payload: MyPackage.msi
Failed to cache payload: MyPackage.msi from working path: C:\Windows\Temp\{B6E80008-0BDD-4B30-8863-345CA2FD8BDB}\MyPackage.msi, error: 0x80070002.
Error 0x80070002: Failed while caching, aborting execution.

Why is Burn not extracting my MSI package so that it can be cached and installed?

I am using wix toolset v3.11.1.2318