The EX-Switch had a vlan with vlan-id 3000 configured which was used on both routers to communicate with each other.
We had everything set up but couldn't get the CFM to establish between rt1 and rt2. I tried to debug it everywhere but didn't get anywhere until I disabled IGMP snooping on the EX for vlan-id 3000. Suddenly everything started to work, CFM came up and the port goes down whenevery the adjacency is lost to the other router, as it should be.
I can't find any mention that IGMP snooping is impacting OAM CFM, so hopefully this gets picked up by Google and folks who have similar problems here.