We've had a number of instructors be confused by this setting. Since the gradebook does not automatically put in zeroes for assignments that students have not completed, some instructors will see this setting in the gradebook and think that by clicking this option, it will automatically change all of the "-" marks to 0's for them.
When Final Grades are submitted, we receive a number of calls from instructors asking why the Final Grades appear differently from Webcourses. We then have to explain it's because they did not insert 0's into the "-" marks and/or misunderstood the "Treat Ungraded as Zeroes" option.
I believe it would be help for instructors if this option was changed to "View ungraded as Zeroes." This gives the idea that you are "viewing" the gradebook with 0's, which is what this option is intended for. By the word "Treat" it gives instructors the idea that it is actually making ("treating") those ungraded assignments as 0's. By changing the verbiage, this setting will be a little clearer for instructors.
Also, it may be even more helpful if after this setting is clicked a banner would appear at the top of the gradebook saying something to this effect: "This setting is only a temporary view. This does not change the actual scores within the gradebook." This would also help prevent confusion for instructors.
This idea has been developed and deployed to Canvas