Hi William,
We understand you'd like to be able to open links in Safari while replacing the progress of the current tabs you're on. When opening a new link outside of Safari, it is expected behavior for a new tab to be created. If this is occurring when you're currently on a website, you'll want to note that some websites may have settings to ensure their content opens in a new window.
The Safari settings you had mentioned only refers to when you hold down on a link or tap it with two fingers to open it. Choosing the options Open in New Tab or Open New Tabs in Background will both result in links opening in a new tab. The only difference is whether the it'll open the link without redirecting you on the spot.
For reference: Use tabs in Safari on iPad
As there are no other options available at this time, we'd recommend leaving feedback about this directly to Apple here: Product Feedback
Take care.