I think I found the cause of this issue - I have been testing email verification with a user created in the auth0 dashboard. As I understand from this long and informative thread -
Redirect To for classic login doesn't work any user created in the dashboard will have an empty {{ application.callback_origin }} resulting in an invalid redirect_to url. So even though the email verification succeeds, since auth0 cannot redirect to a bad url, the error dialog is shown to the user.
All makes sense, but it would be great it this is added to the documentation, or better yet as a caveat under the Redirect To field in the Email Verification configuration. Would have saved me a few hours of debugging. 