Why is it that this option needs to be on when working through an SSH tunnel that's routing to port 7869, when either way, the debugger is listening on that port?

if you debug through ssh tunnel, debugger module connects to the tunnel which is listening on the sshd host (normally it's localhost from the debugger module perspectives) and IDE should inform debugger to do so.
Also, if there are multiple developers in your team, you will have to assign each member with unique port number and have this port set for debugger and for dbglistener.