What is the purpose of "paste newlines as carriage returns" in the Terminal app?
What is it good for?

Sometimes you want to paste exactly what you've copied into something...say a document you're editing in nano or vi and want to preserve it exactly as it is.

Or, you could want to past the CR so it executes the command.

Perhaps the default action to pastes exactly what was copied makes more sense than altering a paste buffer before the application processes the clipboard.