Set file display to source when border buttons are used is not complete correct.
Set file display to source when Back/Forward/Up border buttons are used is correct.
When the other buttons are used the source/destination state of the file display will be unaffected.
(I'm not sure why you tagged this "Commands". There's no need to add a tag to a thread if none apply.)
The option there affects the buttons which are turned on by the options above it. It works correctly. It doesn't only affect "back/forward/up", and there isn't enough space in the dialog to enumerate all the button names it can affect. Those action can appear as normal toolbar buttons as well anyway, which ti still would not affect.
Maybe we can come up with a better label for the option. Or just remote it entirely (at least in the normal toolbar mode), since the back/forward/parent buttons are usually not in that place anyway these days.