How do I include special characters in a path alias?
The ampersand (&amp;) is a reserved character in URLs because it is usually input as part of the query string.  Some more info.
Most special characters can be used in URLs with the settings you described in your question, but &amp; is an exception.  Either just live with %26 as the encoding or rewrite the title to not use the &amp; symbol, which is reserved.
This is not a Pauthauto problem; it's a URL problem.