I've tried everything on this thread...every. single. thing.
I even went further than the OP and fully re-installed the Fall Creators update from scratch, wiping all my apps, everything...and still didn't fix the Windows Spotlight issue. My specific issue was that no matter the setting the lock screen image never changed from the default unless I changed the setting to Pic and manually selected one.
Then I stumbled on something stupid...
Do you have PIN setup for your login? I do. And I set as one almost immediately after re-installing (it was there prior to updating originally). As a last ditch effort before completely giving up on the feature, I turned my pin off and went back to my full MS Account password. As soon as I had the PIN removed from my sign-in options, I locked my screen and...boom! Windows Spotlight on the lock screen. Didn't even have to change the lock screen setting to a static picture first. The setting was on Spotlight the whole time. I wonder if Windows Hello has the same effect on this feature...
I've since turned my PIN back on and it appears Windows Spotlight is still working...but I'll wait a few days to make sure the pic changes before committing to that.
I'm also hoping this little bug (and it is a bug if your login feature hampers other features) also fixes my other nagging issue - none of the sync settings feature work for me either. Considering how many seemingly non-related settings in the system appear to affect this and possibly other features, I hope MS addresses it in future patches.