Inside/outside depends on closed geometry (represented by being black on a DEFAULT/black layer) — the geometry which you are working with is open/unjoined (indicated by being magenta), so rather than inside/outside it has a left/right based on the path direction (which are the beginning/end points).
Carbide Create does not have a feature to reverse path direction, so the best option is to join the vectors together, see:
Since “Inside” and “outside” don’t make sense when applied to open vectors, CC should be issuing a warning when applying Inside or Outside contours to open vectors.
As Ed.E points out above, you need a smaller bit in order to “pocket” or cut “inside” the design itself. You should know what size bit is required before you even assign the tool path by the width of your design. The bit size is always considered in design, if you don’t have a small enough bit diameter then your design may not be completed as intended.
My problem is that I’m actually trying to cut to the right of the inner line, but it seems I’m required to have a close shape. I’ll post that in a new thread here.