I think you got it.
After reading your post, i closed my Nexus cover, and lo..it does automatically blanks out and returns when i open it. i am using it right now for 30mins, with cover unfolded,with no black out.
I wonder why, considering my cover is all leather, with hard plastic as backing.
I am already thinking of resetting it. Anyway, Will observe for the next few days.
I'm really happy. Thank you very much.