Yes, £9.50 is the off-peak price cap with railcard to Watford Junction from zone 1. It looks like it's ignored the fact that you didn't have a railcard recorded when you made the initial journey so the overall price paid is the same as you would have paid had you already had the railcard recorded at the start. Bargain!
I think this would have been the case. I reckon it is just a flag to be set on the card as to whether a railcard discount entitlement is there or not when checking for the application of caps. I'll give you two examples.
The first time I put my entitlement on Oyster, I forgot to do it at the beginning. Travelled around south London (outside Zone 1) for a bit before I remembered and then registered the discount. I hadn't hit the off-peak Zone 2-6 cap then yet and journeys later on that day confirmed that the cap was applied at £3.35, the correct level.
Last November I again forgot to register the discount when I got to London. Got around on a few buses and capped at £3.90, then realised what I'd done (or rather not done) and rushed to get it registered. As I was over the off-peak Zone 1-2 day cap (£3.70), my day capped at that (as I believe it does not refund). Overpaid by 20p due to my brains not working properly.
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