It is recognized ad Gsync, otherwise you would’nt have that checkbox in nvidia-settings.
There are 3 kind of Gsync monitors:
Yours is not in the list of gsync-compatible:
Thus not verified by nvidia.
Of course the indicator option disappears as soon you disable gsync.
The real question is, if you enable the indicator, does it show gsync or normal (while gameplay).
The AW3420DW is a real G-Sync monitor.
Do you use any kind of converter?
Please run nvidia-bug-report.sh as root and attach the resulting nvidia-bug-report.log.gz file to your post.
Nothing obvious visible.
Does it work if you disconnect the second monitor?
If not, please create a file
/etc/X11/xorg.conf.d/10-nvidia-modedebug.conf
with contents
There is this occasionally in the log:
NVRM: Xid (PCI:0000:01:00): 31, pid=106462, Ch 00000086, intr 10000000. MMU Fault: ENGINE GRAPHICS GPCCLIENT_T1_1 faulted @ 0x0_00000000. Fault is of type FAULT_PDE ACCESS_TYPE_READ
Unfortunately, Nvidia cut the G-Sync detection info from ModeDebug, so there’s no real info to get from the logs.
Better try disconnecting the second monitor completely (though this should work with it connected).