That option pertains to the Capsule Component, the part that actually interacts and moves in the game world. It doesn’t resolve Foot IK from putting the characters foot on it.
Edit for clarity and information.
Can Character Step Up On is a pre-check condition for Movement.
The Character Movement Components → Max Step Height determines the capsules maximum step up height for obstructions in the movement direction.
On Collision, CMC checks the “Can step up bool” of the blocking actor to determine if it will execute the step up on logic or not.
Here is an example with Step Up On disabled.
Notice the Foot IK still puts the mesh foot on the actor.
The character can still walk on the mesh, it just cannot step up on it.
