Yes, that would be an issue...
Perch by default would first look to see which method is available and use either in is default setup.
PERCH_EMAIL_METHOD is an explicit setting to say use one or the other and bypasses the check perch would have done to use any available method. Removing this definition altogether would be the best way to correct this issue.
By default this would have been self defined.
Glad to know it was not a perch issue, tether a settings issue.