Templates Not Working on New Sites

I have a fresh multisite install, have network activated New Blog Templates, created a test blog and am using that as my default template. I have Twenty Twelve theme activated and some very basic content on the test blog (default template). The settings seem pretty straightforward and I don't think I'm missing anything.

for some reason, the template is not being applied to new blogs. I get a new site with the default Twenty Twelve and the usual WP setup.

Am I missing something?