This setting is honored by all functionality that triggers a decompilation run. It is ignored by features that load assemblies as their primary function. For example, using the "Load Dependencies" feature will still resolve and load assemblies from the file-system. The same happens when you double-click on an assembly reference in the tree view. It will be resolved and loaded.
Note that disabling automatic assembly load will cause the decompiler to potentially not be able to resolve types from references that have not been added manually and the quality of the decompiled code will be inferior as a result.
Siegfried Pammer