Simply dropping VREF to 0 would probably drop the output current to 0, which is probably what Q2 is being used for (I'm not familiar with the L297 itself).

If INH1, INH2 and JP1 (pin2) are high, then VREF would be 0.

If the PIC's modulating VREF, then it would allow the holding current to be varied - it was probably felt by the designer to be more configurable than other circuitry (and I would be inclined to agree - you could do some cleverness like make the holding voltage [current] drop off over time the longer you don't use it, and then stabilise at a set value for the minimum hold you need). C23 would smooth the signal.

In your latest circuit, the whole left hand side appears to be doing the work of the PIC - and that's a fairly large circuit. Are you sure you don't want to use a PIC (why not?)