If you listen to the leaked snippet of Groove of Midnight with MJ, you can hear a brief moment where the close to album version background instrumentation is played. Also, consider the previous demos with Rod, ie: Slapstick, Baby Be Mine, Got the Hots, etc. They aren't just bare bones piano only, they are more advanced.
IMO, the leaked snippet pretty much confirms there is an advanced demo of GOM. They didn't just play around with it and not officially record anything. MJ and Rod were clearly in the studio recording it.
I think it's safe to assume that when Siedah recorded her version, she got to listen to MJ's demo and work from that.
Rod Temperton himself would have made a demo of the song with guide vocals, like he normally did as the song's writer. So she would have heard that one as well.
Those other Rod songs were proper recordings made in the studio with Quincy Jones producing. Michael liked them, as it seems. But those did not develop far due to other stronger songs taking priority.
Evidently, Michael was not very open to outside writers' songs during the
Bad era. He became more confident as a songwriter and producer on that record.
Rod presented his songs to Michael early on during the official Westlake sessions with Quincy.
It wasn't until midway through
Bad (February 1987) that Quincy sought songs from other writers... And out of that came "Man In The Mirror" and "Just Good Friends", which Michael loved and felt their potential. So he decided to record them and release on
Bad.
(JGF, in retrospect, wasn't a wise move though, let me tell you!)
IMO Michael may have tried out Groove of Midnight in studio rehearsals. But wasn't too keen to do a full recording of it...
Michael already wrote 9 of the 11 songs on
Bad, songs that he felt were the strongest. So he didn't feel as much need to properly record Groove of Midnight if it didn't hold up as strongly to those other songs.
On
Thriller (and albums before) it was a different situation, with Michael having four strong songs and they relied more on outside writers for the rest. As better songs came along during the project, other songs gradually fell by the wayside (Nite Line, Carousel, Got The Hots etc.) - specifically other writers' songs.