When did they change it from if you could watch to if you actually watch?

Technically the rule never changed. If a licence inspector sees a TV connected to an ariel socket then you're breaking the law.

But there's virtually no inspections any more. There were a lot of bad newspaper headlines about poor single mothers going to prison for getting caught (and refusing to pay the fine, but that bit usually got left out), so enforcement basically ended.

In about 2008 it was OK, my flatmate let the "TV licencing" people in to see a TV connected only to games consoles and a DVD player.