You've probably hit the nail on the head there. It would be about 124 F for a 7 deg design day, or 12 degrees over where I've set it. Of course the temperature doesn't stay at the target+1/2 differential temp, but drops down 24 degrees over the cycle. But since the air handler delivery efficiency is biased towards the higher temps since the heat transfer rate drops on the lower end of the water temps, your suggestion makes perfect sense (and would be borne out in practice since it dropped to 7 F just after the sun set and lo and behold the target temp is 124 with the RTU sensor set to off).
Mystery solved ! Design day boiler temps set on the Tekmar need to account for the boiler differential.
Thanks, this has been a useful exercise.