IWT broken?

[Tsumi]

Did you manage to find a fix for this? I am returning from a long break and am not able to get the IWT to work like it used to. I even used the old guides on how to set it up but it just doesn't work. I noticed the software is a little different, is there a new guide somewhere?

[tldr]

Yeah, I fixed it, and subsequently deleted all my troubleshooting edits, leaving just the final verdict in the original post. The answer was that I had turned off click-to-move which is essential for interact-with-target to have the "turn and walk" behavior. Re-enabling click-to-move resolved the problem.