I emailed Logitech regarding this issue. Here is their response:

"Unfortunately, the Custom Button Labels are replicated through all the activities that use the same device. This change was made based on customer requests. We apologize for the inconvenience."

My response back was that there should be an option if you want the Custom Button Labels to replicate.

How about 2 activities like "Music w/TV On" and "Music w/TV Off" set up basically the same, with the only difference being "Music w/TV Off" doesn't have the TV device included at all. Wouldn't this then switch the TV off when selecting it without changing any other inputs or settings?

Yes - that's basically what we suggested a few posts back. Create a new activity that doesn't include the TV.

Last night I didn't have a lot of time so I did what my coworker suggested which was make new custom buttons under the HTPC device and program them with my TV commands for On and Off.

This works as it keeps the custom buttons on the HTPC Activity. There is an issue with this that turns out to be good.
As we all know Custom Button Labels follow the device and are in every activity that uses the device. What I am seeing is that custom buttons on a device that you manually create do *not* follow the device from activity to activity. I have 3 HTPC activities - General HTPC, Watch DVD, Listen to Music. I setup my custom buttons on the Listen to Music HTPC activity. The custom buttons are not in the other two activities like I thought they would be.

This is very non-intuitive since now I have some custom label buttons that are on every activity while others are not. I actually like this since it is like my MX-700 and I can 'assign' buttons to a specific LCD screen.

I will be trying the clone-device method sinceI will 'confuse' the remote if I manually turn the TV off (we always press the TV On button before performing another action, but just in case). Creating two actions, Music with TV and Music Without TV is very cumbersome. We would have to use Music with TV, make a queue, press the "Activities" button, and select "Music without TV". Having TV On and TV Off buttons on the LCD for the Listen to Music action is more intuitive and less button presses.

Thanks for the suggestions and replies. They are very helpful.

Custom buttons created in one activity for a device/function combination show up in all activities where that device participates and plays the same function. My theory is that In your example, even though the device (HTPC) shows up in multiple activities, it plays a different role in each of them - music server, DVD player, PC - hence the custom buttons do not propagate.

The propagation rule described by Spin-dizzy also applies to clone devices. Their functions will be assigned as "passthrough1" to passthroughN". If a clone device participates in more than one activity, its commands will propagate only if its function name is the same.

Or, as it sounds like you have a TV On command that will turn the tv on whether it is on or not, you could just program the activity to issue the TV On command on exit. That way the smart state will definately know that the TV is on before it executes the next activity.

Ryscar, you have the best solution (no clone and simple). "I could not see the forest for the tree."

Simple indeed...as long as the activity ends up in a known (i.e. expected) state at the end of the activity, there would be no sync issues. Good call Ryscar!

Simple indeed but on second taught, he still has to overcome the command propagation problem. He will have to use the clone method.

The "TV On" at activity exit is a good idea. We usually press the 'tv on' button but having it automatically do it would be nice. I already have it press 'stop' to stop the music.

I can use that with the 'custom' buttons I made on the devices themselves. Those buttons do not propogate to the other activities. Another option is the cloned device.

Thanks for the continued input.