Just a guess, but could the statement, "Controls whether an Essbase error is generated when fetching data from a SQL database during a data load or a dimension build" mean that this error checking traps issues executing the SQL Statement, and not the step of loading the fetched data into Essbase blocks? I.E., trapping for whether the ODBC connection exists and is reachable, login credentials are valid, SQL statement execution is ok, etc.
I believe that Essbase data load errors are considered Warnings (thanks for mixing terminology, Hyperion), and when writing batch automation scripts, I've always had to check for the presence of the reject file to determine the outcome of a dataload/dimbuild.