what is LFE in sub settings

LFE is Low Frequency Effects. It is generally the signal that goes to the .1 in 5.1 and 7.1 systems. It is encoded as a separate track in most movies and is targeted to the subwoofer channel. In the 990 manual on page 29 is a pretty good description of how the 990 deals with LFE and also how to set your subwoofer low pass filter (crossover) based on the size and capability of your main speakers. A setting of 80 hz is generally a good place to start even if you have large speakers. The thought is that since lower frequencies require so much more power to reproduce, a powered sub is a better device for producing them and it puts less strain on your amplifier since it is doing less work. That is why the 990 will generally set your main speakers to small even if they are very large when you run the auto setup program. It takes a real bass hog speaker to get the 990 to set it to large.

This is a good explanation. The only time the Subwoofer setting offers "LFE only" is when the fronts are set to "Large" - which is pretty rarely going to be the ideal setting.

If you have fronts that should be set to "Large", you still will typically have center and surround speakers that should be set to "Small". Those speakers will then use their specified crossover points to redirect low frequencies elsewhere. If you have the sub set to "LFE only", the low frequencies from these speakers will go to the front speakers. The "L/R+Sub" setting will share some bass between the fronts and the sub. The "No" setting will disable the sub entirely, and the fronts will get the LFE channel and any redirected bass from other speakers. This bass management matrix can be a handy way to see the logic for different situations.

If you have the fronts set to "Small" (which is how I set them even when I had Paradigm towers that went pretty low), this all changes. The sub only has one possible setting once the fronts are set to "Small" - "Yes".