Is there any setting out of the box that allows Sitecore logins to differentiate between capital and lowercase letters so the username has to match exactly?
There is no out of the box setting for this. In general, the overall consensus on the web is - that having usernames such as
USER1 in your membership database is... should we say "less than ideal".
Likely you would run into all sorts of trouble, even if you were to implement it.
Out of curiosity, I took a deep dive into Sitecore Security code to see if your scenario would be supported even. And the answer is; it will not be supported.
Here is a snippet of code from
Sitecore, internally, treats all Account Names and User Names as case-insensitive. If you were to have user names like
USER1 they would be indistinguishable from a Sitecore perspective - not a place you want to be.