It certainly should do...
That is the goal of the implementation 
So it looks like setting the xattrs doesn't work on NFS and because those failed, rclone gave up on everything else.
I could fix this wit a flag on the local backend --no---xattrs say which stopped rclone trying to write the xattrs.
Or I could detect that the xattr write isn't supported - I think operation not supported is a standard unix error type I could detect, and I could just ignore that.
What do you think?