Well I'm gonna have to rip another CD or something and test this, because every single time I have gone to drag & drop music files into the Music app since installing Catalina, it will not add them that way and I have that checkbox ticked.
I will admit it has been awhile since I have added anything new to my library, so I may be speaking based on an old bug in Music. I recall being annoyed by this cumbersome behaviour and everything I read at the time said you couldn't do it.
I notice now that the Apple article on importing to Music seems to have a *Tip* about using drag & drop that I don't recall seeing before. ?