Danfoss Ally 1.18 set external temperature to Radiator Covered TRV

No. This works as designed by danfos with only difference you’re using your own temperature sensor or calculation.

It doesn’t work like that. There is no mechanical thermostat inside. There is a valve and a PID regulator which is an automation algorithm that tries to keep the measured temperature at setpoint by opening and closing the valve at calculated percentage.

No, you’re wrong. By using external temperature sensor you’re adding better data to the algorithm which is good and works as designed.

What you’re describing is external calculation of valve percentage opening. This is not the case here.