My entry...

IF OBJECT_ID('tempdb..#TestData', 'U') IS NOT NULL
BEGIN DROP TABLE #TestData; END;

CREATE TABLE #TestData (
    Id INT NOT NULL,
    R INT NOT NULL...

This will product the desired results without the need for temp tables or a quirky update...

WITH
    cte_n1 (n) AS (SELECT 1 FROM (VALUES (1),(1),(1),(1),(1),(1),(1),(1),(1),(1)) n...

If the requirement is that some table(s) not accept inserts or updates that refference inactive values, then my first impulse would be to create an "insteasd of" trigger that checks...

In addition to Gail's comments, you can can use OPTION(RECOMPILE) on the table variable query and the optimizer will actually come up with a more accurate row estimations.