It does work like classic Daggerfall. But classic Daggerfall was limited to a 320x200 4:3 display and DOS only. It had a very fixed set of parameters for it's operation.
Daggerfall Unity on the other hand has to work on a huge variety of hardware and software platforms, and display surfaces from 320x200 all the way up to 4k and beyond. There's a lot more going on than classic ever had to deal with. That's why the settings need to exist so people can tune this based on their environment.
Post here if you need help getting started with Daggerfall Unity or just want to clarify a potential bug. Questions about playing or modding classic Daggerfall should be posted to Community.