The Xrm.Navigation.openForm API call appears to have a limitation in non-UIF sections of Dynamics in which you may pass form parameters to the API call to populate the fields of the Entity for which the form relates to OR you can pass the regardingObjectId which will fill only that field. Sending both sets of values (form parameters and regardingObjectId) will only populate the regardingObject in the form if you are making the API call from a non-UIF page. It would likely make things much easier for developers if they were able to send both sets of values in the API call.

Note: This only occurs when the API call originates from a non-UIF page. UIF pages will populate both values. Also this is occurring with the deprecated Xrm.Utility.openEntityForm API call as well.