As a very quick fix, try
call echo %%item%%
This is generation 7,863 of delayedexpansion. There are hundreds of SO entries on this subject. Within a block statement (a parenthesised series of statements), the entire block is parsed and then executed. Any %var% within the block will be replaced by that variable's value at the time the block is parsed - before the block is executed - the same thing applies to a FOR ... DO (block).
Hence, IF (something) else (somethingelse) will be executed using the values of %variables% at the time the IF is encountered.
Two common ways to overcome this are 1) to use setlocal enabledelayedexpansion and use !var! in place of %var% to access the changed value of var or 2) to call a subroutine to perform further processing using the changed values.
Note therefore the use of CALL ECHO %%var%% which displays the changed value of var. CALL ECHO %%errorlevel%% displays, but sadly then RESETS errorlevel.
Note also that your item-displayed using your original code is the last item set in a prior run. You do not have a setlocal command in your batch, so the environment changes are established permanently, not backed out at the end of each batch. The consequence is that you are running with a contaminated environment.