the parameter hide products which are not on stock only works when you use standard stock. It does not work on advanced stock management because the product with more variants can have some variants on stock, some not.
Adding products to cart based on stock is in fact about design but the main and last word has always checkout (so there are different combinations of parameters which allows e.g. adding the product to cart but checkout just checks the rules and decides). Just imagine, you add the product to cart and leave it for two days, then you go back and will finish your order but the product is not more on stock, so in checkout you get the error message about order.
See following image:
It is mostly about design - to hide the add to cart button when the product or product variation is not on stock. But you can e.g. add product to cart but when finishing ordering, it is not more on stock, so as written above, the last word, which checks everything is checkout.
Are you able to make a video or gif or screenshot with steps you do when setting the product und ordering it. (Because in text is not written which product did you add to cart - if main product or product with variant, etc.)
Jan