External keyboard modifiers with Sierra stopped working (when typing non-modifier key on MacBook Pro Retina)
[SOLUTION!] Ha!!! Now it started working. Replying to my own question (related to Skeleton Bow's answer/suggestion - thanks) : Looks like Karabiner Elements kicked it the right way somehow. Even though I did not exactly change anything relevant, just installed it and opened it. Maybe the fact of installing /using karabiner forces sierra to use the old ways of handling modifier keys? Big thanks to @Skeleton Bow for the help in troubleshooting and for suggesting Karabiner Elements!