Create a separate view for each primary menu based on URL aliases in drupal 7
The reason for this problem has to do with how path aliases are handled. When the url is set to a page alias, Drupal translates the url into its actual url taxonomy/term/tid before it seeks the content that is to be displayed, such as your view definition whose path is still an alias.  Since the view path doesn't match the URL, it is not selected to generate content.  If you want a descriptive URL to work with the view path, you cannot use the path aliases.

I have a similar problem where I have converted hundreds of hierarchical taxonomy terms into a menu system with aliases using taxonomy menu. The aliases show up fine when I select a menu item, and set the View definition to Taxonomy/term/% but the views, of course, display the base URL instead of the alias.  I have not explored a work-around yet.  If you find anything, please post it here on your question.