In confluence.cfg.xml there is an option called admin.ui.allow.daily.backup.custom.location to allow / disallow daily backup to be saved to a custom location.

If enabled, the admin will be able to tell Confluence to make daily backup to a different location from the daily backup admin panel.

The problem starts when this option is set to false - Confluence will still retain the custom directory location and continue to save the daily backup there.

Confluence should not do that. If this option is set to false, Confluence should save daily backup to its default location in <confluence home>/backups