Seller can add a note to an order and set the note for a customer or private. For customer note, the customer will get e-mail notification for every note added. And for the private note, only a seller will get the e-mail notification.
To disable the customer note email notification please Disable this email notification from customer note. Please check this screenshot.
I have enabled the customer note email notification like the screenshot you provided. However it dosen't work at all. When i added an order note as a seller, the order doesnt appear in the Order note column in the seller dashboard nor customer receive the note.
I have 3 emails address to test this. One for admin, one as seller, one as a customer, none of these emails receive any order notes. And the order note is not even updated in the seller dashboard order note column after note is added.