Arnold always renders shapes as if they were lofted along the strand. It doesn’t matter whether you clear the Loft Shape along Strand checkbox in the Create Strands PPG, the shape will always be lofted in the render, like this:

If you want your instance shapes to be distributed along the strands, you could use a second point cloud to put the shapes along the StrandPositions:

If you find this slows down your viewport, change the Particle Display to points.