I cannot fathom out why such a simple set up fails.
dir same direction both circles their centres are on Y axis.
drawn a line between them (it has a flat area at tip)
run sweep2 rail
select first circle (smaller one)
select 2nd circle
select line
result is as shown, has a kink in middle.
try for the various options and none are better.
try for sweep 1, select line
select small circle
select large circle.