One workaround for this exasperating "feature" is to install the third-party alternative file manager Xplorer2. Then click on Tools - Advanced Options - Global and check the checkbox for "Disable some Vista effects, e.g. highlight of item under cursor."
This annoyance has existed as far back as 2011 in Windows XP:
WINDOWS EXPLORER: How to disable highlighting of files when mouse hovers?
This is not the same as the light blue borders resulting from Narrator:
How to disable automatic highlighting when i move my mouse over (hover) any item in windows ?
How to disable the light blue border box when you hover over icon in Windows 10
This problem in Windows 7 sounds similar but is not the same; this user is describing a translucent rectangle that appears around multiple files:
How to Disable Hovering Selection Block in File Browser?
This post describes the needless highlighting of Desktop icons (same underlying mechanism?):
How to disable desktop folder highlight on hover
I downloaded and tried the theme files described here but they didn't work for me in Windows 10, and I was reluctant to experiment with UxStyle Core Beta that doesn't appear to be compatible with Windows 10:
Disable line highlight on mouse hover
There are some clues in this reply from Janus on Explorer++ Forums:
Turn off light blue highlight following mouse everywhere
I suggested for a future version of Ultimate Windows Tweaker to be able to turn this off (scroll down slightly to make the comments load, then search for "annoying light blue highlighting"):
Submit bugs for Ultimate Windows Tweaker
Finally, I tried to run Process Monitor filtered on RegSetValue (to look for registry changes) to try to reverse engineer what Xplorer2 is doing but that sent me on a journey to nowhere. I was looking for a registry value that toggled back and forth when I checked and unchecked the "Disable some Vista effects" checkbox in Xplorer2 by comparing the before and after logfiles. Strangely, with one exception, none of the registry values that changed toggled like a simple light switch. Instead, they had one value initially, another value after changing the checkbox, and then an entirely different value when changing the checkbox back to what it was in the first place. In other words, there was a 3rd value, 4th, 5th, 6th, and so on.
The only value that seemed to be like a consistent On-Off switch was this one:
HKEY_CURRENT_USER\SOFTWARE\ZabaraKatranemia Plc\xplorer2_UC.global
binMiscOptions
- Unchecked: Hex b9081a82 or decimal 3104316034
- Checked: Hex b9081e82 or decimal 3104317058
Changing this manually and refreshing Regedit didn't seem to have any effect; the only way that I could find to change the appearance of Windows Explorer was to use the checkbox within Xplorer2.
The other registry values that changed on my PC were:
HKCU\SOFTWARE\Microsoft\Windows\CurrentVersion\Explorer\FeatureUsage\AppSwitched{6D809377-6AF0-444B-8957-A3773F02200E}\zabkat\xplorer2\x2SettingsEditor.exe
HKCU\SOFTWARE\Microsoft\Windows\CurrentVersion\ActivityDataModel\ReaderRevisionInfo\7758C2E2-EAEE-5482-CE2B-0D2618980C18
HKCU\SOFTWARE\Microsoft\Windows\CurrentVersion\Explorer\UserAssist{CEBFF5CD-ACE2-4F4F-9178-9926F41749EA}\Count{6Q809377-6NS0-444O-8957-N3773S02200R}\mnoxng\kcybere2\k2FrggvatfRqvgbe.rkr
HKCU\SOFTWARE\Microsoft\Windows\CurrentVersion\Explorer\UserAssist{CEBFF5CD-ACE2-4F4F-9178-9926F41749EA}\Count\HRZR_PGYFRFFVBA
HKCU\SOFTWARE\Microsoft\Windows\CurrentVersion\Explorer\UserAssist{CEBFF5CD-ACE2-4F4F-9178-9926F41749EA}\Count\P:\Hfref\Revx\Qrfxgbc\Cebprff Zbavgbe\Cebpzba64.rkr