Does ItemsTemplate+DataTemplate obscure bindings?

Question

At several points in my current application, I have an ItemTemplate such as the following:

<ItemsControl.ItemsPanel>
        <ItemsPanelTemplate>
            <StackPanel Orientation="Horizontal"/>
        </ItemsPanelTemplate>
    </ItemsControl.ItemsPanel>
    <ItemsControl.ItemTemplate>
        <DataTemplate>
        <ToggleButton  Margin="2,0" Content="{Binding}" Tag="{Binding}"  Click="ToggleButton_Click">
            <ToggleButton.IsChecked>

                <MultiBinding Mode="OneWay" Converter="{StaticResource EqualityConverter}">
                    <Binding RelativeSource="{RelativeSource Self}" Path="Tag">
                    </Binding>
                    <Binding RelativeSource="{RelativeSource FindAncestor, AncestorType={x:Type cc:ToggleButtonPanel}}" Path="SelectedItem">
                    </Binding>
                </MultiBinding>
            </ToggleButton.IsChecked>
        </ToggleButton>
    </DataTemplate>
    </ItemsControl.ItemTemplate>

Now, I've stepped through the converter and it returns true and false as expected, but the controls do not change their ischecked state... There are no binding errors, and this only happens when using an ItemsTemplate/DataTemplate combo. Has anyone else seen this behaviour?