I think the programmer selection "Arduino as ISP" only applies to the "Burn Bootloader" option. The avrdude flash burn operations ignore this setting and use "-c arduino". This has 2 unintended side effects:
1, It erases the fuses on the target Nano rendering it unusable.
2. It replaces the firmware in the programmer Uno with the code intended for the target.
There are a number of articles stating that you need to solder a 10uF capacitor between RESET and +5 but only after loading the ArduinoISP code in the programmer. The last article I read contained some less than clear wording on which platforms this is needed on. If it needs a delay after asserting reset, why not put it in the code???