func_instance_origin is a internal point entity available in all Source games since Portal 2. The entity is supposed to set the center of an instance for placement and rotation, but it appears to have only been partially implemented. The entity will affect the positioning of the instance in Hammer, but the bounding box isn't updated to match, and it has no effect in the compiled map; the instance will be placed with the center of the VMF as the origin as usual.
To do: VBSP is if fact processing and removing the entity (as indicated by the lack of any unknown entity errors in-game), but doesn't seem to actually be doing anything with it. Maybe the entity can be made to work somehow?