1.8, random stars, Local System Generation doesn't seem to function.
Initially my bug report was going to be that the game never generated connections to existing systems, and I ran a test game intending to prove it, but it turns out they're just incredibly unlikely and LSG is a probable culprit. I used default settings except random stars and I allowed 0 NPR, no star swarm, etc in order to have a peaceful galaxy to auto-explore. I SM'd propulsion tech and explored with ships rather than using SM-explore because I wanted it to get created exactly as it would if I were playing "for real".
When I stopped running the test game I had 80 known systems, with two loop connections (labeled "new link") back to known systems and two "double links" which connect systems back to the systems from which they were originally explored. 83 JP explorations in total. Galactic map image and DB attached.
I'm thinking I probably just got the two loop connections by hitting the same random numbers out of 1000, without any interaction from LSG. With 80 systems revealed the chances of that have started to get pretty good (8% chance per JP exploration now). As for the "double links", they are to be expected if LSG is working properly (about a one-in-sixty chance with default 50-15 LSG settings) but are incredibly unlikely (0.1% chance) if it's not working, so it's a bit odd.
I did another game just now with 100 stars, 90% LSGC, 3 LSGS, and have SM-explored 20 systems now without any loops, just double links.
Finally, system naming gets really weird when your name theme runs out. I expected System #0, System #1, etc, but instead about half the new systems are named System #0 and the rest are either slightly more than #1 or slightly less than #1000, with nothing in between.
To reproduce: play random stars game in 1.8 with any LSG settings. Expect few if any connections to known systems.