The issue appears to be that Cell Formatting is not called when the DGV updates it's internal list and builds the rows, or at least it's not called before the validating event is fired.
The situation is that I have a DGV control that is bound to a List of business objects.
One of the columns is NOT bound to the Data Source and I have wired up the Cell Parsing and Cell Formatting events to handle the persistence of the data for this cell.
NET in VS2010 it seems that when you close a Win Form the "Row Validating" event of the Data Grid View on that form behaves differently depending on whether the form is MODAL or NON-MODAL.
What we did was open the form (MODAL and NONMODAL) and changed a value of a cell and then immediately clicked the "X" to close the form.
Of course if there is an issue I Cancel the validation and the row is not committed.