Email notifications based on formula updates?

Notifications only trigger when the record is updated. When a formula changes, the record is not technically updated. To make this work correctly, trigger the email based on the same thing the formula uses - ie whatever is changed in the project that triggers the status field to update (perhaps it is a date that is put in?).

The user must be doing something that ultimately changes the status formula, so trigger it off whatever that thing is the user does.

If it becomes late because it's a certain day (todays date is after date due), one option is to run a pipeline at say, 1am every morning and have it look for say 'Status = late and Due Date=Yesterday', and have it check a box that says 'Trigger Late Email Notification'. Then use that late box trigger. Or simply set up a reminder email.