On the Item configuration screen,  what is the meaning of the "Replace Product ID with Non-Product ID if specified"

If a GL mapping has a Non-Product ID then the option on the left will try to use the ItemNumber that comes in the XML if available. And only if there isn’t (like in a Time entry) then it will use the Non-Product Id in the mapping as a default product id if available.

With the option you highlighted it will always attempt to force the use of the Non Product Id in the GL mapping