Grub uses wrong UUID and cannot create config file

Question

I've tried performing an installation to a USB drive as per the wiki. Everything works up until I try to boot and grub tries to load the wrong UUID for my / filesystem.
My next step was to chroot back into the USB install and manually change the UUID to the correct one. Odd, as others have pointed out in this thread
the grub-mkconfig command should detect the correct UUID if run from within arch-chroot.
Anyway, after changing the UUID in /boot/grub/grub.cfg and trying to regenerate the config file with `grub-mkconfig -o /boot/grub/grub.cfg` I noticed the file had not changed. This is because the command is exiting successfully, but isn't actually writing any file. I deleted the file and tried the command again to be sure. No new file.
Next I booted into grub, using the config generated with the wrong UUID, and dropped to the shell using `c` -- I was able to load my install just fine using
set root=(hd0,gpt2)
linux /vmlinuz-linux root=/dev/sdb3 ro
initrd /initramfs-linux.img
boot
From there I tried removing the bad config file and recreating it using the `grub-mkconfig -o /boot/grub/grub.cfg` command... no dice. Does anyone know what is going on? At the least the command should tell me that it is failing, no?

Answer 1

Attached is the output of `grub-mkconfig` running from the chroot.
root@myhost# grub-mkconfig
Generating grub configuration file ...
# DO NOT EDIT THIS FILE
# It is automatically generated by grub-mkconfig using templates
# from /etc/grub.d and settings from /etc/default/grub
### BEGIN /etc/grub.d/00_header ###
insmod part_gpt
insmod part_msdos
if [ -s $prefix/grubenv ]; then
load_env
fi
if [ "${next_entry}" ] ; then
set default="${next_entry}"
set next_entry=
save_env next_entry
set boot_once=true
else
set default="0"
fi
if [ x"${feature_menuentry_id}" = xy ]; then
menuentry_id_option="--id"
else
menuentry_id_option=""
fi
export menuentry_id_option
if [ "${prev_saved_entry}" ]; then
set saved_entry="${prev_saved_entry}"
save_env saved_entry
set prev_saved_entry=
save_env prev_saved_entry
set boot_once=true
fi
function savedefault {
if [ -z "${boot_once}" ]; then
saved_entry="${chosen}"
save_env saved_entry
fi
function load_video {
if [ x$feature_all_video_module = xy ]; then
insmod all_video
else
insmod efi_gop
insmod efi_uga
insmod ieee1275_fb
insmod vbe
insmod vga
insmod video_bochs
insmod video_cirrus
fi
if loadfont unicode ; then
set gfxmode=auto
load_video
insmod gfxterm
set locale_dir=$prefix/locale
set lang=en_US
insmod gettext
fi
terminal_input console
terminal_output gfxterm
if [ x$feature_timeout_style = xy ] ; then
set timeout_style=menu
set timeout=5
# Fallback normal timeout code in case the timeout_style feature is
# unavailable.
else
set timeout=5
fi
### END /etc/grub.d/00_header ###
### BEGIN /etc/grub.d/10_archlinux ###