@Zack. I'm experiencing the same thing. You ever figure it out?

I don't want to block the creation on every MO there are some that may need a back order.

I've attached images to show the sequence of what I'm experiencing. I have everything set the same way as you've shown. The backorder is still being created without a prompt. I'm hoping to see anyone may have other answers. Thanks for taking a look at this!

If you want to block back order creation.

First check the operation type of your manufacturing order.

Then click there( or please go to inventory->configuration->operation types)

Select never option.