I've never had active desktop set to on over the 5 years this machine has been running. I installed no other programs or made any other changes to the system before or after installing litestep. I have tried everything I can think of, from options in tweakui (nothing to change there) to viewing all ini files from the date of install on.I can find nothing except the line in system.ini cited.

Something made the change. Since the only software or settings changed was by installing litestep, your refusal to aknowledge it is not the cause is interesting.
Perhaps you can suggest exactly what changes you suggest with "just a few clicks" - because I don't see it.