Ok, here's the resolution, directly from RME:
[The hardware input mute buttons are not stored in stand alone mode. Turn the fader down instead. Then flash this setting.]
I tried this and it works. Again though, all this was not really my fault. Who would have ever thought the mute buttons aren't stored, but the fader levels are?? 
And had the KPA been able to run SPDIF at something other than 44.1K I wouldn't have needed to connect both analog and SPDIF input options into the RME. So in fact I was indeed hearing and feeling a very real issue all along, but it was attributed to circumstances stemming from design of both the KPA and RME.
Anyway, issue finally resolved.
Sonic