Without rfc3768 mode, the arp caches of other systems need to change to pickup the new ip->mac mapping. RFC3768 mode solves that, but there is a bug for which I have a patch.
Can you check your arp cache? If the arp cache on 172.16.4.254 did not get updated, it might cause these symptoms.
You could verify that. On both master and backup routers, run two simultaneous dumps:
sudo tcpdump -i eth0 dst host $target
sudo tcpdump -i eth1 dst host $target
while from some system in 172.16.5.0/24, run “ping $target”. You should see the icmp packets incoming on eth1 and outgoing on eth0 on the master. Do a vrrp transition, and which vyos box sees the incoming pings, and does either box show outgoing pings?