Alen Alex Ninan <alenishere@gmail.com> writes:

> 1. Have I made an error in how I define the directory local file?

No.

> 2. If I have not made and error, Is it possible to define the attachment 
> directory in directory local variable and have org mode respect the 
> location when display of inline images are enabled during startup?

The problem you are seeing is because Emacs assigns directory-local and
buffer-local variables _after_ Org mode (or any other major mode) is
loaded.

Org startup staff happens during loading before directory-local
variables are assigned. Hence error.

I've seen multiple issues coming from the above behavior.
Hence, I'd like to propose Org to call `hack-local-variables' early
during startup. The patch is attached.

Best,
Ihor