First off: you do not have to switch the option on at all when you have no problems in the drawing files like missing patterns etc. or a weird display of 3D-objects in the animation window. So, in general: switch it off and leave it that way unless you face display problems. This option is not part of any workflow except an "emergeny-workflow"
Project Offset coordinates: the only case where you should the project offset is if you a have data in your project that is more than 5000m away from the Allplan Zero point AND b if you are willing to move the data to the Allplan zero point at the same point. In short: set an Offset and move data. Let´s say you discover, that your data is roughly 5000m (X) and 3000m (Y) away from the Allplan zero point. You move the data -5000 (X) and -3000m (Y) AND set an offset of 5000 (X) and 3000 (Y).
Important: Setting an Allplan project offset alone is not moving data. It only adds the given values to any import and any export.
During the import of data Allplan can move the imported data and, to "cover that up" set an project offset at the same time.
Example: you get a file with elements far away from the CAD zero point. You immport them to you project (which has at that moment no offset yet), during the import you let Allplan set and use the offset (with that Allplan moves the imported data to the zero point and saves the moving values as offset). Result: the data is in the near of the zero point and at any point where you export data from that project, the saved values (offset) are added to the exported data - it is with that exported to it´s oribinal coordinates.
I hope, that explains it a bit.