I think that may be a misunderstanding. As I understand it, the setting is for the suggested topics that are displayed under a topic. It’s not for “your topic is similar to”.
The suggested topics below this feedback topic are all from the feedback category.
But I agree this was easier to understand when, instead of “New & Unread Topics”, “Suggested topics” was shown above that list. This was changed in UX: Topic recommendations tweaks. (#22880) · discourse/discourse@e7fb4be · GitHub. But the setting still refers to “suggested”.