Hello Michael,
I am assuming that you are talking about web-authentication, and under the WLAN configuration for Security > AAA servers, there is a section for "Authentication Priority for web-auth user".
I'm guessing you have it set to RADIUS and then LOCAL right now based on your description. In this situation, the only time that we will check the local database is if we don't receive a response from the RADIUS server at all. (a failure for an unkown user still counts as a response)
Now, the behavior is a bit different in the other direction. If you have it configured for LOCAL and then RADIUS, if the user does not exist in the local database, the RADIUS server will then be queried.
So if you want both databases to be checked, you likely would want to set it for local first, RADIUS second.
-Patrick Croak
Wireless TAC