I found out roughly what's happening here, and it's a non-trivial fix. I did make an improvement on the behavior for 509.1309 so that the color will carry through, but I wasn't able to get the text-decoration to carry over.

What's going on is that the text is being parsed, and is sent in a deliberately sanitized form to the client--but the sanitization is a little imperfect in that it can strip some things out. The text-decoration style is being interpreted correctly, but at the time it's applied it sees that there isn't actually any underlining going on, so it doesn't do anything. In theory the correct behavior would be to carry over the whole style attribute, or at least a parsed version of it, at which point the inline style would correctly override the link's default style. (I'm moderately baffled as to why this works correctly in DS, but I think it's because DS looks at styles in a very sequential rather than hierarchical way, where the underline would normally be applied in the very spot where you're telling it not to apply.)

As a workaround for now, I recommend that if you want all your output links not to be underlined, just set text-decoration:none for links in a .dms stylesheet or your default output control's styles. I think either one of those should become the webclient's main stylesheet and therefore should have the effect you want.