Glad you found the root cause. There should have been an indicator of the circular reference, usually (but not always) in the lower left of the bottom status bar (not included in your screen shot), and certainly when you entered the formula.
As for the behavior of Evaluate Formula.... My understanding is: it does not change the cell value. Think of it as stepping through the cell calculation on scratch paper. But it displays the current cell value in the last step, which we knew was zero.
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