When an instructor sets the grade posting policy for an activity or a course to Manual, that preference for a manual release is ignored by the default setting on New Quizzes for "Hide Results from Students Toggle".
The state of "Hide Results from Students Toggle" should be tied to the state of the grade posting policy for a New Quiz by default. If I make the grades automatically visible on a New Quiz, "Hide Results from Students Toggle" can stay disabled. If I make the grades hidden by default, "Hide Results from Students Toggle" should be set to enabled.
