It seems no matter where I use it, it produces some kind of direction, even if there's no possibility the character in question could've ever stepped there.

If any player has moved through a room, including the one using blood trail, it will display that track as belonging to the person you target with the skill, if they're online, or it will say the person at the top of the who list if you don't have a target. The only use it has in this state is that it gives a different message when you try it on someone who isn't logged in. So you can use it to check if someone with duo or some other hiding you can't see through is logged off or not.