the member mentioned in this post now does not have the option to renew, just create a new membership!

Correct, that's what you asked for. You wanted them to no longer be able to renew if they had been expired for more than 3 months. That's exactly what "Can be reactivated if expired or cancelled since less than" is doing. At this point I don't know what you're trying to do and recommend reviewing the available parameters carefully and document a very clear plan on what you're wanting your plans to do.

You've set your plan to the following in that case?

Renewable in advance by: 1 month
Grace period before real expiration: 1 week (7 days)
Can be reactivated if expired or cancelled since less than: 3 months
Manual renewal extends expiration date as follows: Renewal starts at expiration date or at payment date - whichever happens last (allows free gap)

If not please provide the exact configuration you're using.