A Graphic element set to display the Dialogue Portrait will update if the line has a Speaker. If the line has no Speaker (as is the case with Narration), then the element will show - but not update the assigned Sprite within the Image.
Ok, I finally fix the issue where this weird blue box appears in the portrait during a conversation. I fixed it by going to the Conversation Menu in Menu Editor then under for Portrait Graphic, I changed the Fallback texture.
Your Variable: Set Action is copying the value from the Narration Menu. If you want to extract it from the last-spoken character, have it instead reference the Subtitles menu. First though, test it by setting the New value is field to Entered here, and enter the name directly.
I did this and this is the result: https://imgur.com/a/xrdK2y9
It seems the Speaker displayed there is from the Subtitle-Context. Which is strange because I've already linked in the Variable: Set by having the Menu name be set to Subtitles and Element name set to SubSpeakerLabel.
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Ok, I finally fix the issue where this weird blue box appears in the portrait during a conversation. I fixed it by going to the Conversation Menu in Menu Editor then under for Portrait Graphic, I changed the Fallback texture.
I did this and this is the result: https://imgur.com/a/xrdK2y9
It seems the Speaker displayed there is from the Subtitle-Context. Which is strange because I've already linked in the Variable: Set by having the Menu name be set to Subtitles and Element name set to SubSpeakerLabel.
Your Narration menu's "Speaker [var:35]" element is not set to accept tokens.
The [var:35] token must be assigned in its Label text field - not the Element name field.