Pieter

Thank you for all the contributors to this topic.   i have had many days of frustrations trying all the permutations of various settings but couldnt fix the set of problems as mentioned above..   learnt new insights.    
One question though: on VEConfigure on the charger tab, i have the "configured for VE.Bus BMS" unchecked.  seems to be working fine as is .  
Would like to know the settings of other users...
System:  Victron components with BV26V mini batteries

On this topic, I had a support case one day of an inverter that was permanently stuck in sustain. It turns out that the sustain voltage was configured to the same voltage as float. Since you need to go 1.2V above sustain to get out of it... it simply couldn't ever get there. After lowering the sustain voltage, the system started operating correctly.

Aaah late to the party 🙂
The Victron defaults are for 16-series batteries. Pylontech is 15s. So if you have Pylontech or Dyness batteries, you have to adjust them down.
The dynamic cut-off curve is only used while the grid is connected. When running islanded, it only switches off once the low-voltage cut-off is reached, or if the BMS disconnects the DC supply.
The dynamic cut-off curve is more important for lead acid batteries. For lead acid, a single cut-off voltage is not sufficient. A 12V battery that is at 11.5V with no load is almost completely empty while one at 10.5V that is doing a 0.2C discharge may be more than half full. The cut-off curve provides an intelligent way to to have a load-dependent cut-off point. It is not as serious with LiFePO4 since those batteries have much better current delivery capability.
When you have a BMS in the system that will disconnect, or send a DCL=0 request (Discharge Current Limit), you don't really need the cut-off curve. That is why the instructions call for just setting them all to some low voltage. It avoids reaching the cutoff unnecessarily.
It is important to not set the cut-foff too high. If you do that, the inverter will go into sustain mode too easily. For example, it might go into sustain at higher loads and 30% SOC, because the voltage starts drooping a bit too much.
(Sustain mode is when the inverter charges the battery at a low charge current to protect it from damage. Again, more important for lead acid batteries).
So given that you already have DCL control and a BMS that can disconnect the DC bus, it is okay to set the dynamic cut-off nice and low so it does not cause you issues lower down.
Note also that the inverter activates a pre-alarm once you get within 1.2V of the 0.002C value. If you set that value too high, you will get a pre-alarm even though the battery has plenty of juice left. So that is another reason to set it nice and low.