Does this Root Locus analysis contradict my understanding of Nyquist stability criteria?
The only thing you're misunderstanding is that those vertical root loci do, in fact, imply and ever-diminishing phase margin.  They're describing a system that goes resonant, with a Q that increases (or \$\zeta\$ that decreases) as the gain goes up.  

That increasing Q is indicative of ever-diminishing margins.

(And just to note, even though you seem to understand this already: the real circuit has more poles, off to the left of the one at 1MHz.  In the root-locus view those poles will push the locus to the right, because root loci tend to go away from poles and toward zeros; that would make the system unstable.  In the Bode-plot view, of course, those poles would add more phase shift; that's just a different view of the same phenomenon.)