Use Internet = NO is ignored when the Login screen (Startup window) is used and the user Signs-in. See logs at http://community.logos.com/forums/p/22849/170600.aspx#170600
And Use Internet = YES is ignored when you use the Sign In screen and click Work Offline.
That is, the two buttons override your defaults, by design.
When you click Work Offline you expect an override, but overriding NO is unexpected when you Sign-in (as you might gather from our responses!).