I think in my case the issue was related to uTorrent still seeding. Depsite the fact that uTorrent had moved / copied the file into the Watched folder and should not have been using that copy for seeding. As soon as I changed settings to stop seeding immediately this issue went away.
TorrentBlackhole is only a stop gap measure for me until I figure out why my torrent clients are not playing nice with magnet files. Is working well as an interim now 