I found out a bit more from the product group. It seems some legacy operating systems, like Windows NT 4.0, bugcheck if they perform a CPUID and have more than three leafs returned. The checkbox is there to allow us to try and get them working. So I was on the right track after all. I still think this functionality does limit what functions of the processor can be detected and suggest you try and leave it off if you can.
It is important to note that the operating systems are not necessarily supported by Hyper-V.
For more information about how Microsoft defines what operating systems are supported on Hyper-V checkout the Windows Server Virtualization Blog at http://blogs.technet.com/virtualization
And in case you didn't know yet! Hyper-V RC1 was released to Windows Update last week!