Setting a service to manual does not prevent it from starting automatically, if Windows or another service needs it.
And Steam needs it, so Windows it starts it. And if you disable it, Steam will error out.
Ok, i went through some lenghts to see what this was all about (cause i'm curious). I did everything you said from using autoruns (after seeing some tutorials online), disabling Steam Client Service, rebooting the PC and everything.
Results:
>Disabling it there, rebooting the computer and running steam does cause an error to show up... but if you just press cancel, Steam will open up and work just fine anyway.
>Re-checking the box makes steam launch up without the error as normal.
>Disabling the box and running steam without rebooting the computer causes the error to appear again (and again, Steam will run as usual if you just press cancel).
My hypothesis:
>Steam probably runs some self-diagnostic program on launch, and when it detects that Steam Client Service was tampered in some way it assumes there's something wrong with the installation, but since it doesn't affect runtime it'll just go on to launch as usual if you ignore the error.