After spending a lot of time with this since I first posted, I found the solution, and it explains why I've never seen anybody have the same problem.
This morning I started messing with every setting I could think of to try and nail the problem down. I started by adding a new display state and looking for any clues. After making a couple changes I would 'reload' the assembly to start over again. After using 'reload' a couple times I began to use the right-click context item 'recent commands' to select 'reload'. I missed the clue the first couple times, but eventually I noticed that along with 'reload' on the recent commands, there was also a call to a 'colors' macro I had created! Years ago I had created the macro for changing part colors and assigned it to shortcut key 'F2'. Somehow, when I added a new display state it would automatically trigger the macro and change the assembly color state.
I solved the problem by changing the macro shortcut key from 'F2' to 'C'. Weird.