I hit this issue again in January 2019 with CuraEngine 3.6+git. Since support for multiple extruders was added, it now auto-loads a per-extruder settings file that overrides the main settings file and the command line, so -s material_diameter=1.75 on the command line did not help. Given $foo.def.json, it seems to construct the filename %$foo_extruder_0.def.json, and if that does not exist, loads fdmextruder.def.json, which sets material_width to a default of 2.85.
I was able to solve the problem by either patching fdmextruder.def.json, or making a copy of it named to match my printer's settings file, with the 2.85 changed to 1.75.
Update: There should already be extruder files for supported printers, but they're in a different directory, so they won't be found when invoking CuraEngine from the command line unless you've set the CURA_ENGINE_SEARCH_PATH environment variable to include the path they're in. Alternatively you can copy them to the same directory as the main printer json files.