According to the wiki description it should disallow entering navigation mode, but pressing the Select button still enters this mode. Using LStick no longer moves the selection around though, which is expected.
Repro code:
local UIS = game:GetService("UserInputService");
for i = 1, 8 do
UIS:SetNavigationGamepad(Enum.UserInputType["Gamepad" .. i], false);
end
Specs:
Windows 7, Xbox 360 USB controller (using the back button to initiate UI mode)