I set up a personal alert like this:
And then I checked in a breaking change on a working build. Kicked the build, and waited for it to fail, then several minutes afterward. Still no email.
I set up this:
And re-ran the broken build. Only then did I receive a notification.
So I removed this personal notification, and editing the global All Users notification to monitor everything a la my personal notification. As expected, that sent an email to every developer in the company.
We absolutely need to make these notifications work properly so that people only receive relevant emails, but this seems to be broken.
We use domain authentication, as does TFS. All VCS roots are TFS roots.