'Disable Drupal blocks/regions' setting doesn't work when blocks are placed into regions with systems other than core blocks.

If you set Disable Drupal blocks/regions on a panel or panelized page, sidebars with blocks added through context still get rendered. Ctools implements this feature like this:

/**
 * Implement hook_block_list_alter() to potentially remove blocks.
 *
 * This exists in order to replicate Drupal 6's "no blocks" functionality.
 */
function ctools_block_list_alter(&$blocks) {
  $check = drupal_static('ctools_set_no_blocks', TRUE);
  if (!$check) {
    foreach ($blocks as $block_id => $block) {
      // @todo -- possibly we can set configuration for this so that users can
      // specify which blocks will not get rendered.
      if (strpos($block->region, 'sidebar') !== FALSE) {
        unset($blocks[$block_id]);
      }
    }
  }
}

Not quite sure why, by it's no taking effect with Omega/Context.