Interesting. Looks like the $args are being passed to my wp_page_menu() function. After some further digging I notice that does not accept the container & walker parameters. Time to write my own.
Thanks for sharing your knowledge!
I definitely understand that, is guess the question is fallback_cb is undefined and defaults to wp_page_menu is there any way to pass the defined wp_nav_menu vars over to wp_page_menu?