I’m started to think this may be a bug inside of engine 
I didn’t use modelling part of UE5 before btw.
To give an additional information about Config Folder and Project Settings;
When there is an option, do tweak changes with volumes instead of tweak project settings.
As an example; setting Game Mode and Player Controller in project settings to some Blueprints you created, makes these BPs global for all levels.
Instead, I use GameMode Override from World Settings and keep all default on project settings.
Same goes for Render part too. I keep everything as default in Render of Project Settings and use a Post Process Volume with “Unbound” option enabled.
This allows me to ignore Configs at least until late parts of project.