1. I'm not using Docker
2. I did a regular install in an LXC container with Apache
After trying a bunch of other things, which of course none of them worked, I tried one more thing and that was to just peek inside /etc/php/7.4/cli. And what do you know, another php.ini file.
I edited that, restarted Apache and also restarted heimdall.
I was finally able to change the background to a file larger than 2M! Woot!