Like you and possibly many others, it always struck me as a totally numbskull decision not to have Steamboat go over Valentine, thus setting up a Savage/Steamboat rematch in the second round (because you can't have a *good* match on that show, obviously).
Although I do wonder if they didn't go that route because they didn't want to risk siphoning Savage's babyface heat at what was supposed to be his big coronation when you put him up against someone as inherently sympathetic as Steamboat (and it's not like
you could have the announcers play up their history, what with Savage trying to, you know, kill Steamboat with the ring bell).
Ah, the hell with it: it would have been a great match (if – and that's a big "if" – they gave them time), they should have done it anyway, right?
I'm pretty sure that although your theory is a solid one, the real reason is that they were pissed at Steamboat and that was their way of punishing him.