ipkg remove just gets rid of the binaries, not the config files or the data files.
The default config file does prefer sqlite2, yes, although the package on the nightlies page has support for either sqlite2 or sqlite3.
If you choose one or the other, you need to get rid of your existing database: /opt/var/mt-daapd/songs.db. sqlite2 can’t open a sqlite3 database, and vice-versa. So if you switch types (sqlite2/3), you need to nuke your songs.db. That means your smart playlists are gone, though.
A workaround might be to convert the sqlite2 to sqlite3. You can do something like this:
slug$ sqlite /opt/var/mt-daapd/songs.db .dump | sqlite3 /opt/var/mt-daapd/songs3.db
slug$ mv /opt/var/mt-daapd/songs.db /opt/var/mt-daapd/songs2.db
slub$ mv /opt/var/mt-daapd/songs3.db /opt/var/mt-daapd/songs.db
And the oppose for sqlite3 to sqlite2.