As large language models (LLMs) advance toward expert-level performance in engineering domains, reliable reasoning under user-specified constraints becomes critical. In circuit analysis, for example, a numerically correct solution is insufficient if it violates established methodological conventions such as mesh directionality or polarity assignments, errors that can propagate in safety-critical systems. Yet it remains unclear whether frontier models truly apply first-principles reasoning or rely on entrenched training priors that conflict with explicit instructions. We introduce CircuChain, a diagnostic benchmark designed to disentangle instruction compliance from physical reasoning competence in electrical circuit analysis. CircuChain consists of counterbalanced Control/Trap problem pairs across five canonical circuit topologies, augmented with systematic variations in sign conventions, current orientations, and polarity definitions. A multi-stage verification pipeline, combining symbolic solvers, SPICE simulation, and an LLM-based error taxonomy, enables fine-grained attribution of failures to convention errors, physics errors, arithmetic mistakes, or hallucinations. Across 100 tasks per model, we observe a consistent Compliance-Competence Divergence. The strongest model evaluated exhibits near-perfect physical reasoning but a high rate of convention violations when Trap conditions deliberately invert natural sign patterns. Conversely, weaker models display lower physical fidelity yet superior adherence to explicit instructions. These results suggest that increased model capability does not guarantee improved constraint alignment and highlight the need for new evaluation frameworks that stress instruction-following under mathematically rigid domains. CircuChain provides one such framework and offers actionable insights for both engineering education and AI alignment research.