Even though you've opted into the etags, it seems you need to separately enable xbithack to allow a 304 to be generated (ap_meets_conditions in the core checks no_local_copy flag referenced in mod_include
http://httpd.apache.org/docs/current/mod/mod_include.html#xbithack
/* When our xbithack value isn't set to full or our platform isn't
* providing group-level protection bits or our group-level bits do not
* have group-execite on, we will set the no_local_copy value to 1 so
* that we will not send 304s.
*/
if ((conf->xbithack != XBITHACK_FULL)
|| !(f->r->finfo.valid & APR_FINFO_GPROT)
|| !(f->r->finfo.protection & APR_GEXECUTE)) {
f->r->no_local_copy = 1;
}