No, you're not crazy! The DDK's setenv.bat file now REPLACES the PATH environment variable to point to the DDK's executables, instead of pre-pending the DDK executable path as it has done in the past.
This late change was due to some unexpected interactions that were found, based on how the user's path was set.
If you need to change the path, just set it to whatever you need. However, if you DO change the path and you discover any build problems, be sure to try setting the path back to just point to the DDK.