Yes, that's definitely the issue. The "Receive System Emails" setting is meant for letting specific users (mainly of manager or higher status) get.. system emails. Those are definitely things like new user registration, but extensions can use them for any type of notifications.
We've heard in the past from users that have done migrations on their site, or from 'bad' components, that many/all users have that Receive System Emails option set. We're not sure what extension would ever set that for users, but you can imagine the nasty results. I'd highly recommend checking all your users for that setting, or running a SQL query to set the receive emails column to 0 for everyone, and then just enable it for yourself... just to make sure.
Hope that helps,
Alex