I have a SQLite DB that is set up so when I delete a Person the delete is cascaded. This works fine when I manually delete a Person (all records that reference the PersonID
I was having the same problem with SQL Server. When I tried to update mode from database, it didn't pick up the cascade rules. Note that the rules were added after the model was already created. I even tried deleting a table from the model and adding it back in. That had the same effect - no cascade rules.
However, when I created a brand new model with the same exact tables, it picked up the cascade rules. So my solution was just to delete the old model and create a new one with the same name, etc.
I guess is that there is something wrong with the update model from database process.