Mine does that as well when I have mine turned off and my tires slip.
I believe that the traction control is still disengaged, it's just giving you a warning that you've lost traction.
To fix that (If it's going off without losing traction and just turning), then go check the ABS cable coming from your 2 front wheel hubs. They're more than likely ziptied too tight to the knuckle and upper control arm.
I've only got one loose ziptire near the center of the knuckle that lightly holds the cable close to the knuckle and away from the wheel and the rest of the cable is free.
Just crank your wheel to lock each way and take a look at that cable. It might still look loose, but add in the few inches of suspension travel and that cable will tighten up pretty quick when going on inclines/declines/around turns while on a hill.
Any update on the fender rub? I still say that's your likely source.
What offset are your rims?