So if I'm using ASIO (which I am) then is it:
I think you misunderstood. If you're using ASIO, that is one of the times when you might want to use format conversion plug-in. ASIO requires that the application give the audio data directly to the sound card in an appropriate format. There is no translation between the application and the sound card, which generally results in higher quality audio. But it means that if your audio data is in a format that the card can't handle, then the app has to reformat the data.
For example, if you were using ASIO to play a 22 kHz audio stream, but your sound card only supported 44.1 and 48 kHz, you would get an error message. By enabling the format conversion plug-in, you can have MC resample the audio to an appropriate format before it passes the audio data to the sound card.
If, in the same circumstance, you were NOT using ASIO, you wouldn't need to use the format conversion plug-in, because the application could hand the 22 kHz audio data to Windows, then Windows would take care of resampling it to a format that the sound card supported. Adding the format conversion plug-in would just add an extra, unnecessary conversion.
Again, as a general rule: if you are using ASIO, don't bother with the format conversion plug-in unless you get an error message like "sample rate not supported" when you try to play a file. If you are not using ASIO, don't bother with the format conversion plug-in at all. These rules aren't right 100% of the time, but they are good guidelines if you're not sure what you should be doing.