I never encountered that, but Steam can get weirdly stuck on a Proton update or setting if you start manually messing with its library folders. For as much as people like their contributions to the ecosystem it's still a private, for-profit storefront and they're not particularly keen on you fiddling with it or in supporting you when/if you do.

That said, I haven't had that issue. In theory Proton shouldn't mess with your native software regardless of your options setting being on or off. Presumably even with it defaulted to on if you switch it off manually things would go back to showing all non-native software as "unavailable" again, right?