You said you turned offline files off first and then added the reg key. It could well be that it's the offline file service that reads the key and acts upon it and that because you've turned offline files off it's not performing this action. Try turning it back on, re-apply the regkey then turn it back off.
Having said that I've just re-read your post and you mentioned that the key is being deleted which would suggest it's being read. Worth a try though.
With regards to manually clearing the CSC folder this shouldn't cause any issues i've done this before with no adverse effects.