Per @kodo's discussion with Gargron, a person's posts only make it to the federated timeline if someone on your instance is following that person. IMO this is a design flaw — it encourages centralization on one big instance (so that you can see entire conversations and find new people easily) even more than it encourages cross-instance links.
@sonya Although he did say that it does a recursive follow for threads, so that is a bonus. He says that's more than what gnu social does so I'll call it a win.