I would suggest you work around your errors with the default recovery system and if you can't handle it with that, then only go for changing the Agent and Extension options.
Here're some pointers to look at before you change these settings:
1. as mentioned above, implement the recovery system
2. Customize the recovery system by having your own ScriptEnter, TestCaseEnter and this group of functions
3. Instead of changing options using the Silk Editor menu, do it in your appstate/basestates.. benefits are that the options get ported to new installations/machines with the scripts, and one does not need to manually configure SilkTest.
As for how it will affect testing the application, well, its like asking what would happen if I tinker around with the engine of my car...
1. Do it only when needed, and
2. When you know what you are doing and
3. When understand what its implications are....
// The Persistent Bugger
Agent|Verification and Timing are the ones that solves the most problem and are related to each other. UI automation revolves around perfect timing.
Extension is important if you wish SilkTest to recognize what you are testing. Using the wrong setting is like trying to open a door without a key - it's just not going to work.
It's hard to list all problem/solution related to the configuration of SilkTest but in two words "timing" and "compatibility" are what you want to remember from the configuration menus(Agent/Extensions).