There's a program you can use to check the capabilities of your graphics hardware, called 'GLview'. That will tell us right away if there's a limitation that's causing the issue, or if it's somehow something else - which is still a possibility. EDIT: I forgot to mention, the values you want to look at for your graphics hardware's OpenGL capabilities are "GL_MAX_TEXTURE_SIZE" and "GL_MAX_RECTANGLE_TEXTURE_SIZE". I'm thinking they might be capping out at 4096, which would make sense if going up to 120ppi for a 35" project because that will produce a depthmap that's over 4096px in the longest dimension, and get rejected by the graphics hardware. This is still just speculation but I'm 95% confident it's the cause. I already have a solution to that in place, so hopefully that's what's causing the issue.
The rest-machining will omit cutpaths that intersect areas removed by *all* previous operations, if they are "enabled" (the little paperclip button on an operation in the list when it's selected while in Project Operations mode).
I think I will add another toggleable option with the "link cuts"/"distance sort"/"rest-machining" options for generating paths to tool-center or to the tool's radius. It shouldn't be too tricky ;)
I saw your other post just now about the G-code. I'll reply about that over there.