With the option enabled the compass in nether points somewhere far far away to the SW (i tried following it for a while but gave up) but not to the portal.
Strangely in twilight forest dimension it works and points to the portal

Quark 1.4.122
Forge 1.12.2 14.23.2.2611

Can't reproduce. Do note that you need to have the compass on you when you enter the nether for it to track the portal.