Correct way to extended Field Settings
You can add extra field instance settings as part of you custom module using hook_form_FORM_ID_alter, e.g.

/**
 * Implements hook_form_FORM_ID_alter().
 */
function FOO_form_field_ui_field_edit_form_alter(&amp;$form, $form_state, $form_id) {
  $field = $form['#field'];

  // @todo: Consider adding extra condition.

  // Inject setting form element to an instance settings form.
  $form['instance']['settings']['pre_on'] = array(
    '#type' =&gt; 'checkbox',
    '#title' =&gt; t('Render Prefix as Prepend'),
    '#description' =&gt; t('Some description'),
    '#default_value' =&gt; isset($form['#instance']['settings']['pre_on']) ? $form['#instance']['settings']['pre_on'] : NULL,
  );
}


If you don't want to create new module for a single checkbox, consider adding this hook into your template.php file as part of your theme.