"For intercompany inventory transfers, disable the Use Item Cost as Transfer Cost preference." So, we must turn off "USE ITEM COST AS TRANSFER COST" instance-wide for intercompany?

yes

That's a bit annoying. Wish they could auto-toggle that for intercompany transfers.

Actually no. It's a checkbox on the IC TO screen and you can uncheck it on the transaction without removing it system wide. You could probably get a workflow to handle the automation of that.

It errors during the IC PO creation process. So they seem to have some check for it.

I guess it would depend on what the error is since the transfer cost only comes into play on the receipt and not the PO (under normal circumstances). If it has to be unchecked across the board then workflow the box to be checked on a regular TO