all of my defaults for media items are to disable loop source for everything, because i prefer to copy items rather than looping them. i knewwww there was something creating loop source enabled midi items in my projects and i finally found it:
in preferences Loop Recording Settings, when "midi overdub/replace recording always creates selection length media item" is enabled, items created within a time selection where the item is ended by the loop end, the item is loop source enabled.
note that if you create and end an item within a time selection loop, the item does not have looped source enabled. it's only when the item endpoint is created by the loop end.
here's the problem behavior. note that the item appears when midi overdub begins, and as desired, a selection-length media item is created. however, it's loop source enabled:
and here's the desired behavior (where a pre-existing, time-selection-length midi item is being overdubbed to)
5.9rc1