I just set up a ritual of the feathered knife with a Tier 4 blood altar that has 10 runes of self-sacrifice. The ritual is completely ignoring all of the runes of self-sacrifice and is only using/generating the base amounts of LP. I tried this with an altar utilizing a well of suffering and runes of sacrifice, and I came up with the same problem. Is this intentional, a bug, or is there something I didn't do right?

Ah, my apologies. I didn't realize that it only does half a heart of damage per operation, and so when it takes a full heart it's actually taken the full amount that would've been incorporated into a single prick with the Sacrificial Knife. Sorry for wasting time.