I feel like the obvious thing to check here is that all chrome processes have terminated between tests. If it's still running some zombie process of course the data would persist.
It would still be a (albeit convenient for google) bug, as the setting indicates closing all windows as the trigger for deletion.
Why would that cause only Google’s info to be preserved across sessions, though? Somewhere, Google are privileging their own data and preventing it from being deleted when other data are deleted and the browser is configured so everything should be gone.
At least on windows, closing chrome doesn't close the system tray process which keeps Chrome and Gemini prestaged and cached. Wonder if OP is experiencing a version of that on his Mac?
Microsoft Edge does this too, iirc, for "Startup Boost".
> Wonder if OP is experiencing a version of that on his Mac?