URL alias not working in Contextual filters using node reference field
"node/%" is a system path, not an alias. When you use the path "node/%/foo", Drupal looks for an alias of "node/%/foo", and doesn't find one. Next, Drupal will "bubble" your request up to the system menu handler at "node/%" with the path argument of "foo".

When you use the path "alias/foo", Drupal looks for an alias of "alias/foo" but doesn't find one. Drupal does not bubble up your request to "alias".

This is a long-winded way of saying that if you want an alias like "alias/foo", you need to add it yourself. There are many ways to do this, e.g. use rules.