Please bear with me a little. For the moment, let’s ignore your screen edges bug completely (we can come back to it later).
Rhinoceros > Preferences > Tool Palettes > Hide tool palettes when starting commands
predates my time here at McNeel, so I have to calibrate my expectations as best as I can.
In this case, unfortunately, the documentation is not helpful.
As far as I can tell, this feature does not work at all in Rhino 5.5.5 and 6.23. If I reset my preferences, then enable Hide tool palettes when starting commands, they do not hide when I start a command. That seems like a bug to me. In fact, if I restart Rhino, having this feature enabled just automatically hides the tool palette right away (it flickers and disappears). That’s essentially this bug:
RH-56725 ToolPalettes: Floating Tool palettes Disappear
which @JohnM recently fixed (back to that in a moment).
When I look at the source code, I can glean a little of the intention however. The developer intent is for this feature, when enabled, to hide the tool palettes and then show them again when the command is finished. That source code lines up with my expectation, but not yours, if I’m understanding correctly.
In Rhino 7 for Mac, in the current RhinoWIP, if I completely reset my preferences to factory-defaults, then I launch Rhino for Mac and navigate to Preferences > Tool Palettes and enable Hide tool palettes when starting commands, it performs how I would expect it. The floating tool palette hides when I start the command and reappears when I finish the command. Ok, good…that works for me.
Ok, back to your screen edges issue…
I wonder if you have adapted to, developed habits, and created workarounds for buggy behavior (until John’s recent fix)? Is that possible? If so, that’s doubly unfortunate and we need to figure out what to do.