Yes, the toggle last shot "hold open" on this Stoeger Luger does release and unlock when a loaded magazine is inserted. I couldn't get it to work at the range because I simply wasn't pulling it back with enough force. The locked toggle can only be pulled back a fraction of an inch which is required to unlock & release the hold open mechanism. When I tried it again just now the toggle did indeed release.
Thanks to KBob on RFC for letting me know.