The reason this is set this way is exactly as you say "A student might want NO while reworking old assignments during review for an exam" and it is really pretty easy for a student to change this for one session. It is the way I as a prof would want it to work. But if you want it to work the other way, again as you noticed, simply set Can always show old answers by default to student level. Maybe toward the end of the course when students might be reviewing for the final, you could set it the other way. But either way, it's pretty easy for students to do what the want if they know they can switch the setting.
Arnie