The settings.liveupdate file will not change when you have the SEPM as default for liveupdate.
as you might know there is no schedule for liveupdate when SEPM is configured for defs
when you click on liveupdate , it would read settings.liveupdate to get defs
this file does not have any info about SEPM so will go to internet
but will have an entry when intrenal liveudpate server configured.
I checked this on my test machine and i have not enabled internal liveupdate server
please correct me if i'm wrong...