I closed the window and now I can't find it again. I've tried the Editor toolbar dropdown and Create Features is not even on there (at all, not even greyed out).
In Windows explorer copy and paste the following location in the address bar and replace username with your username on the machine with the arcGIS install on it.: C:\Users\username\AppData\Roaming\ESRI\Desktop10.1\ArcMap\Templates
Delete normal.mxt (your mxd template) this will restore you mxd to it stock/original format with all your toolbars and windows where they would be when you first open the mxd.
Thanks to johns and Chris W! That was it! The Advanced Arcmap Settings under the program Utilities folder was exactly the issue! After a total program reinstall, .dll inspection, and multiple (hundreds!) of button clicks, it was the simple "Create Features using templates" checkbox. Now the real question is how did that box become unchecked? If it is some kind of feature that can be messed with within the program, why does it have to be utilized through a separate .exe program? We may never know... ;)
*here is a screen shot for future reference, along with the path listed above:
Path to executable AdvancedArcMapSettings:
**C:\Program Files (x86)\ArcGIS\Desktop10.2\Utilities**