[QUOTE=ForteXX;1874600]Weapon being sheathed or not has -absolutely- no effect on anything.[QUOTE]
Yes it does, But only if you set it up that way. You can make it so only certain hotbars are available when sheathed or in attack stance. Going by TC posts it sound like he has his bars set this way ,and with No attacking skills on his sheathed hotbars. Though he could just select enemy then initiate auto-attack by pressing X to go into attack stance.

Though the only benefit to using that option is not having so many hotbars to cycle through. I just got used to manually selecting other hotbars(by holding R1 to pull up selection hotbar) instead of cycling through them, Since I started with Arcanist and cycle button turns into pet bar button with pet out.

Disabling Auto-sheathe weapon when not in battle.' option.
Wouldn't help, because is not auto-sheathe when not in battle but auto-sheathing while using item, which there is no option to dis-able.