story progression turned off but game still populating custom world?

It's pretty much the only way to do so, Regular EA SP will shove townies down your throat regardless of whether you shut it off or not. It seems to have a single-minded purpose... If there isn't enough sims in town, it's going to do whatever it has to to populate the town. :) Hence the reason why I have NRAAS SP. At least I can shut off the population immigration.