I'm hoping and expecting the latter.
You're right.
Then this really is not so much a set your own kelly % more more a set your own leverage.
I don't think so. Leverage would be if I was to consider your bankroll to be N times bigger than you've actually deposited.
But that's not what this is. What you're doing here is deciding what percentage of your investment you want to risk at most, and then, when the player decides to only bet X% of the maximum, you get to risk X% of the most you're willing to risk.