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It can't be "packing down" if it's not moving for any of the small bumps though, right?
It will be running at sag though, i.e. partially compressed. It might be that the parameters mean there's too much resistance to further movement at that point because there's too much drag thanks to compression damping or too much resistance thanks to negative to positive air ratio or not recovering high enough in the stroke due to too much rebound damping etc etc
tl;dr it should feel like there is an air bubble under your hands. At least, that's what a well set up short(ish) travel fork feels like to me. For short travel and small bump sensitivity, sack off the rebound and compression damping and err towards too much preload. This will encourage the fork to return to a spot where it can react to small bumps due to the high ratio of negative to positive spring or something
It can't be "packing down" if it's not moving for any of the small bumps though, right? This was a gravel ride not an MTB. It's not like it was getting any big hits.
Time to bung on a Laugh, sorry Lauf.