A couple quick questions about these new options
Does one have to be using trace path rendering for this to be effective?
Do these options apply only if choosing the intersect underlying feature, or these options are just on this tab randomly placed?
These features have nothing to do with Path Tracing. In the case of the Surface Layer it actually doesn't have to do with Intersect Underlying either. Note how there is a horizontal line in the interface between Intersect Underlying and those settings? That's there to delineate a different area and different, separate features. So in this case it implies that "better continuity" actually affects the Fuzzy Zone.
The affect of these settings is clearly explained in the Change Log which is available on the page you downloaded this version from, as well as in the /Docs folder of your Terragen installation directory.
"Surface Layer has options on the "Effects" tab called "Better colour/shade continuity" and "Better displacement continuity". These cause the fuzzy zone calculations to use a higher quality exp() function instead of the fast approximation which was used before. The fast approximation is usually good enough for colour/shade distributions, but it can cause visible segmentation of the fuzzy zone when used to constrain displacements.
Added "Smoother fuzzy zones (better curve continuity)" checkbox to Distribution Shader V4, on the Tweaks tab. This is similar to "Better colour/shade continuity" in Surface Layer (see above)."