Alright, I think I figured out what was happening and also some good news for future folks who stumble across this thread!
About a month ago, the driver was updated to support the “decoupled/detached” mode but I guess I missed it? The label is called “Button controls switch”. I could have sworn I checked the settings again today (I’ve had this tab pinned to come back to for a while…) or maybe my brain was in lizard mode for that 30 seconds! 
I tested it out with a Simple Flow to log a message to the Timeline and that worked fine. I setup an automation to toggle the connected Hue bulb that is in the socket and went back to work.
Now after a couple of hours, I had the lights on and decided to use the switch to turn off the bulb. This worked fine, however later when I came back and hit the switch to turn the light on, nothing happened.
I tried holding, double pressing, nothing worked. But I could go to a separate scene controller that I had in the room and adjust the connected light bulb with no issues, but after clicking the switch to turn the lights off, it would no longer respond to button presses.
A quick search turned up this thread and specifically a comment calling out the 3W minimum to run the switch. Doh. I turned the light on to full brightness with via App and sure enough, the tiny blue LED on the front came back on (it’s really hard to see without getting right next to it in my room) and after about 10 seconds, it would start sending button pushes back to Homey.
So in conclusion, the H1 can be set to Decoupled mode now natively in Homey but for arguably the most likely usage scenario (controlling a smart bulb), you will need to add one of those bypass accessories that I assume is just a capacitor that sips power to keep the switch powered on. Or depending on the connected smart light, maybe it requires more than 3w at idle. I can say for certain that a Tradfri bulb from Ikea does not draw more than that when “off”.
If you want to control something else other than the load on the circuit, then I assume it should all work as expected.
I’m going to order one of those bypass dongle things and see if that “fixes” my problem.
