I had the same problem - the .xmp sidecar files did not seem to be written anywhere no matter what I did.
However, going back into Settings/Metadata/Sidecars and checking the option “Sidecar file names are compatible with commercial programs” seemed to enable the writing of the sidecars again.
There must be a bug that happens when that option is not checked.
I submitted a bug to the bugtracker:
bugs.kde. org/show_bug.cgi?id=492849
(not linked because I can’t submit links on the forum yet)