Keep that setting at 'yes'. In v4.3, we added that setting, and defaulted it to 'off'. In 5.0, we defaulted it to 'on'. The plan is to remove that option altogether in the next release and leave it permanently on. You are the first user to have issues with that option since 5.0 was released, and it turned out to not really be an issue with JFBConnect.
Regarding the validation issues, there isn't much we can do about many of those. The social networks use some custom HTML elements that they look for on the page, and aren't 100% HTML compliant. Those validation issues shouldn't cause problems for you though either with search engines or browsers rendering the page.
Of the 50+ errors, it seems like about 20 or so were from the social buttons in JFBConnect. The others were not related to JFBConnect and are things you could likely fix. Some things like the closing /ul for a list that wasn't open are things I'd recommend looking into more as that could cause rendering issues in some browsers.
I hope that all helps, but if you need anything else, just let me know.
Thanks,
Alex