Just thought I'd add to this old thread as it was the first one that came up when I was searching on this problem. I was just dealing with the same issue - I had 1-2 local lyric file versions, out of 20, that would not display.
As I held the Host and Client iPads side by side, the song title and artist looked absolutely identical.
On the Host iPad, in the Song details, I erased and re-typed the song title and artist, which again looked absolutely identical to what it was before, and now local lyrics were displaying.
I can only assume that maybe there was a space in front of either the Song Title or Artist that was not able to be seen in the Song Details page.
I'm not sure how, but it would be handy if there was some way to review what is in ST and make it easier to find these issues. Sort of like when you are using Microsoft Word and you turn on 'Show Special Characters' so you can easily spot spaces and tabs.