I updated the section on the "Default Resolution" in the manual to make its function more clear. Here's what it now says.
The Default Resolution determines the resolution of a video stream when no other reference is available. There are two general situations when the Default Resolution setting comes into play.
First, when an actor generates video and has no video inputs to determine what the resolution should be, e.g., the Video Noise actor. For these actors, the output resolution will always be forced to the Default Resolution setting.
Second, when actors with one or more video inputs have one of those inputs disconnected, e.g., the Text Draw actor or Video Mixer actor. For these actors, a black frame will be generated at the Default Resolution to provide a “signal” for the missing inputs.
To make this more clear, we’ve provide two examples of the second situation mentioned above. For purposes of these examples, we'll assume the Default Resolution is set to 320x240.
First, let’s say you have a Text Draw actor. Its 'video' input (which allows the text to be drawn on top of another video stream) is disconnected. In this case, the output resolution of the Text Draw actor would be set to the Default Resolution of 320x240, because the black frame replacing the missing video input will have a resolution of 320x240.
Second, let’s consider a Video Mixer actor. The first video input is connected to a video stream with a resolution of 1920x1080\. The second is not connected. Since there is no input to the second video input, a black frame with is generated at the Default Resolution of 320x240\. Now the Video Mixer must scale one of the two videos (the 1920x1080 input and the 320x240 black frame) so that their resolutions match.
How this scaling is performed in this situation is controlled by the When Combining Video popup menu described in the next section. If this parameter is set to:
Scale To Smallest (Faster) then the 1920x1080 video will be scaled down to 320x240 and the output will be 320x240.
Scale To Largest (Slow) then the 320x240 video will be scaled up to 1920x1080 and the output will be 1920x1080.
Scale to Default Resolution then both inputs are scaled to the Default Resolution of 320x240. The black frame is already 320x240, so it won’t be scaled. But the 1920x1080 video will be scaled down to 320x240 and the output will also be 320x240.
If, on the other hand, you had both video inputs of the Video Mixer actor connected – and if their resolutions were different from each other – then only the "When Combining Video" setting is used when deciding how the videos are scaled. In this case, the Default Resolution would only come into play is if When Combining Video popup menu is set to Scale to Default Resolution.
Does this explain things for you?