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I have already used Legacy figures, altered them, re-named, and re-saved them to the library. I've also altered and saved some Kids4 figures. How will unchecking the "Use external binary morph targets" affect the stuff I've already saved, if at all?

The figures will still load the .pmd file if it exists (in the folder where it expects it and not corrupted) because there is a script line to load such in the .cr2 generated.  If you resave the figure with option unchecked, all morph data will be written out to new .cr2 and no line will be written to load .pmd on next use.

Having this option unchecked does not prevent the use of .pmd files from a pose file or script so their is no impact on utility.