Even with Improved Sleeping set to true in the server config, everyone in the overworld must sleep to skip the night.

I did attempt deleting the config file and allowing it to repopulate.

Minecraft 1.16.5
Forge 36.1.0
Quark r2.4-311

It seems like Quark calculates the total amount of players incorrectly, please see below issue for a bit more context.
EnigmaticaModpacks/Enigmatica6#2761

Hello! Quark's moved to 1.18 now-- unfortunately, this means that (unless your bug is critical and/or game-breaking), we're closing support for issues filed for versions prior to it (e.g. Quark on 1.16).

If your issue still occurs on 1.18, or if your issue happens to be rather critical (e.g. consistently crashing the game with no other mods present), please leave another note or open a new issue. Thanks for your cooperation!

(This is in vanilla now, by the way!)

What percentage is the "Percent Req" value set to?

Also not working for me. It is set to 0.25 for me. We have 3 players on and with 1 asleep the night will not pass. With 2 asleep it will pass.