When an instance of a component which has ‘gluing’ behavior is placed in the model, it glues onto the selected face and it orients itself so that its blue axis matches the face’s ‘normal’.
A gluing component has its blue axis represented as a blue 2d-cross, rather than the usual blue axis line.
A gluing component will glue onto a face even if that face is not in the same context as the gluing-instance itself - e.g. the face is inside a group or another component instance.
A gluing component can also have ‘cutting’ behavior.
If the face onto which it is glued is in the same context as the instance itself, then it will ‘cut’ a hole in that face [visually at least].
However, if the face is within a group or another component instance there is no cutting - only gluing.
A cutting component will also fail to cut a hole if the geometry in the component does not form at least one continuous loop of edges on the face’s plane - i.e. the loop’s vertices must all be at the z=0 within the component’s definition.
If this is not the case editing the component can fix it, but then any instances which have already been placed and glued will still not cut - they need replacing with fresh copies, or a plugin which ‘reglues’ can be used [e.g. part of my HolePunchTool].
Your example SKP works fine - but only if you work within the group edit context, and place the instance directly onto the face - otherwise when placed onto the ‘container’ you’ll only get gluing - with no cutting.
If you delete the back face of the box within the group you can see that the component does indeed cut the hole.
Incidentally the face in your frame is facing downwards so you see the back [reverse it so visible faces are the ‘front’].
This obfuscates the issue as it looks like the ‘glass’ hole in the frame is not cutting a hole as you see the inside of the box’s back-face and it’s the same color as the incorrectly oriented frame’s face.
A cutting component only cuts one face - the face on which the instance is glued.
If you want a cutting instance to punch a real hole through multi-skinned geometry [i.e. two or more parallel faces] - like a wall - then you’ll need a Plugin…
Look at my http://sketchucation.com/pluginstore?pln=HolePunchTool
This allows you to punch a real 3d hole, with matching reveals, which selects and moves etc with the instance.
It also has extra tools to reglue instances etc…