Custom Built Avalon IP generating waitRequest but not being honored in the Interconnect.

(Using the new terminology below: host=master, agent=slave)

The interconnect may not be passing the waitrequest to the host because the host is not trying to access your agent component if I'm looking at the simulation correctly. There's no need for the interconnect to stall the host from accessing your agent if the host is not actively trying to access your agent. Remember waitrequest input to a host completely stalls the host. If the host wants/needs to access other agents, the interconnect is not going to stall it even if a particular agents is manually asserting waitrequest.