The issue of iTunes reverting back to the C Drive has been ongoing for quite a while. It does not appear to be high on Apple's list of priorities to be fixed. The solution (that I use) is that whenever I want to import from CD into iTunes, I change the setting to the drive and folder that I want - if I remember! I frequently forget and have to cancel the import and start again.

But therein lies the point: that preference only determines where future imports from CD are placed (and I assume, purchases from the iTunes Store). It does not move your existing files and it makes no difference to purchases of music from other online sources such as Amazon, Bandcamp and Betaport. When you obtain music from those sources, you place the files in the folder you want and then tell iTunes where the files are located.

I don't use consolidate files personally. One thing though: do not move files from their original location once you have told iTunes where they are. If you do, iTunes will lose track of them and be unable to play the songs or copy them to your devices.