Step 3: use the Auto button. (Then chose what fan speed you want.)
But whenever I manually select the fan speed while in auto, my auto light goes out and I assume
this also turns off AUTO, is this not a correct assumption?
Looking at your photo I also see the AUTO light is off, again doesn't this mean AUTO has been turned off?
I don't know about all models, I suppose this might be different on the 2011 and 2012 Leafs. But when you push any other button and the Auto light turns off it's still partially in Auto.
Auto does mainly two things: it chooses the fan speed and the vents, and may also choose a third thing: how much outside air it wants to use. If you mess with any of those things the Auto light goes out but the other functions will still automatically keep choosing themselves.
For an example: You press Auto, then you press fan speed. The Auto light goes out and the fan speed stops being chosen automatically. But the vents will still be chosen automatically.
Or: You press Auto, then you select a different vent. The Auto light goes out and the vents stop being chosen automatically. But the fan speed will keep being chosen automatically. (You can turn the heat up or down and the fan speed will change with it just like when the Auto light is on.
What we want to do here is to get the defrost and floor to come on automatically. If you can do that you can then use the recirculation mode and get them to work together. This is the only way, because if you choose the defrost and floor mode manually and then try to use recirculation it won't let you.