As far as I am aware, it used to be a decoration-only option to draw the circle around the close button. Now it draws circles around close button throughout the breeze widget style as well. If this is preferred for reasons of consistency, then the setting should be moved out of the decoration settings, or it should be made clear that it is not a decoration-only option.
I think it's done this since as long as I've used that option. I think it's intentional. I agree that it should either be decoration-only, or else not be in the decoration settings window.
A possibly relevant merge request was started @ https://invent.kde.org/plasma/breeze/-/merge_requests/189