The second cause, and it is the one that produces the dusty result when you add more spice: the spices were never cooked properly.
Ground spices need to spend time in hot fat. That step — blooming — is where the aroma compounds are released and dissolve into the oil, which then carries them through the whole dish. Spices added to liquid, or added late, stay as suspended powder. They taste dusty because they literally are dust.
So when a recipe says fry the paste until the oil separates, that instruction is doing real work, and the time it takes is usually longer than people give it — often eight to ten minutes rather than two. Adding more spice to a dish where the first lot was never bloomed makes it dustier, not stronger, which matches what you found.
If you want to test which problem you have: take a spoonful of the flat curry, add a squeeze of lemon, taste. If it comes alive, it was acid. If it stays dull and powdery, it was the blooming.