So you have the sys_email inbound action as a lower "Order" than the Incident one, that's good... it will process it first and if it meets your criteria in the condition, it will send an auto-reply and stop going down the rest of the inbound email action list and won't continue on and also create an Incident.   So if that's the case, and it is running that auto-reply one and not the Incident one (but the auto-reply one isn't actually sending out), you might need to check the instance's email settings and make sure that email sending is turned on and that nobody else is intercepting all emails.

And if that's all good, then check the email log to see if it's even creating a "send-ready" email entry when it goes.   The action is basically just creating an entry in the email log saying that this email needs to go out, and then it should be sent.