Diluted magnetic semiconductors possessing intrinsic static magnetism at high temperatures represent a promising class of multifunctional materials with high application potential in spintronics and magneto-optics. In the hexagonal Fe-doped diluted magnetic oxide, 6H-BaTiO3-δ, room-temperature ferromagnetism has been previously reported. Ferromagnetism is broadly accepted as an intrinsic property of this material, despite its unusual dependence on doping concentration and processing conditions. However, the here reported combination of bulk magnetization and complementary in-depth local-probe electron spin resonance and muon spin relaxation measurements, challenges this conjecture. While a ferromagnetic transition occurs around 700 K, it does so only in additionally annealed samples and is accompanied by an extremely small average value of the ordered magnetic moment. Furthermore, several additional magnetic instabilities are detected at lower temperatures. These coincide with electronic instabilities of the Fe-doped 3C-BaTiO3-δ pseudocubic polymorph. Moreover, the distribution of iron dopants with frozen magnetic moments is found to be non-uniform. Our results demonstrate that the intricate static magnetism of the hexagonal phase is not intrinsic, but rather stems from sparse strain-induced pseudocubic regions. We point out the vital role of internal strain in establishing defect ferromagnetism in systems with competing structural phases.