That "Download Smart Previews Only" checkbox relates ONLY to the image format that you download TO the iPad FROM the cloud, i.e. it acts as a local device space saving measure. The raw images you import will sync up to the cloud as full res originals, once they are uploaded to the cloud they may eventually be automatically removed from the iPad to save space on the device (previews still remain, however, so you can still see and organise the images). However, to further edit an image on the iPad requires either a smart preview or the original, and if neither currently exists on the local device either a smart preview or a copy of the original will be automatically downloaded. If you use smart previews, understand that any edits you make will sync back to the cloud and will be applied to the original.
So basically, there's nothing to worry about with that particular setting.....it will be what many users (including myself) will use.