Thanks for double-checking.
When I first looked into compileall, I opened http://bugs.python.org/issue10454 where I state that I find the description of those options unclear or even not understandable, so your diagnosis that I just copied text is right.
A rewrite to fully cover the module functionality in clear English is needed. Your email was very helpful; can you turn it into a patch and post it to the bug? Thanks in advance.