This feature works by adjusting the first letter of the target segment to the first letter in the source segment, as you type.
Do you mean that it has always been so? I hope it's not nonsense what I say, but I was under the impression that the behaviour was different. Actually, this is one area of CT that I had been praising highly since the beginning.
Yes, it has always been so. Maybe, you are confusing this feature with "Automatic fragments adjustment" (see it in Edit > Preferences > Auto-assembling tab) during auto-assembling?
"Automatic case adjustment" is turned ON in Edit > Target segment, but when I type a lower-case term that in the glossary is capitalized no conversion occurs anymore.