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I had very similar behavior. The right AlrGr was locked (red) and left Alt was latched (gray).
No modifier was applied to the layout so I could not use my national letters (Polish) at all.
I tried everything in the settings window and nothing helped. Some settings even made it worse, to the point I couldn't get the right AltGr to latch. It would unlatch instantly (and no, I don't mean auto unlatch after n seconds, this was set to 0 - disabled).
Ultimately what I did was add second keyboard layout in system preferences, change to it and then change back to my national layout. This seems to have reset internals of onboard and everything started to work properly again.
If I encounter the same behavior again, I'll try to take note of circumstances in which it has manifested itself.
Onboard version: 1.4.1-7
OS: Manjaro