How can I completely disable OS X Sierra "Storage Optimization?"
Optimized Storage isn't a single feature you can turn off in a single place; it's a bunch of similar features that you'll need to check and (if necessary) turn off individually. That Manage Storage window you got to from About This Mac is designed to let you turn on various Optimized Storage features, but not really useful to check their status or turn them off.

There's a good explanation by Adam Engst in two articles over at TidBITS: Explaining Sierra’s Optimized Storage and How to Turn Off Sierra’s Optimized Storage. I'll attempt to summarize.


Files: in System Preferences > iCloud pane > iCloud Drive Options button > deselect "Desktop &amp; Documents Folders" (to prevent those folders from being stored in iCloud) and "Optimize Mac Storage" (to prevent deletion of local copies of the documents you do explicitly store in iCloud).

After closing that Options dialog, turn off any other kinds of that you don't want to have synced with to iCloud. Note, however, that for some of these data types, you can enable them here and then use the relevant app to choose which items get stored locally and which are synced.
Trash: In Finder, choose Finder menu > Preferences > Advanced tab > deselect "Remove items from the Trash after 30 days".
Photos: if you turned off iCloud's Photos feature in the iCloud preferences, you're done. If you want iCloud to store and share photos, but not delete local copies, you need to go into the Photos app, choose Photos menu > Preferences > iCloud tab > deselect "Optimize Mac Storage".

Note that Adam recommends that if you do use iCloud to share photos across your devices, you should have one Mac set to "Download Originals to this Mac" and not to "Optimize Mac Storage", and then make sure that Mac gets backed up. Seems like good advice to me.
Email attachments: in the Mail app, choose Mail > Preferences (not "Accounts"!) > Accounts tab, then for each account do Account Information tab > Download Attachments pop-up menu > choose "All".
Videos in iTunes: in the iTunes app, choose iTunes > Preferences > Advanced tab > deselect "Automatically delete watched movies and TV shows".