Could you explain the concept of colonial wars a bit more thoroughly? I don't understand what this option does apart from not allow you to call in your allies. Does it apply to the allies of the person you're attacking too or just the attacker? Are you required to use it to get the concede colonial area concession?
What I think would really make this tickbox matter would be that by enabling a colonial war, the war is entirely limited to the theatre in which the war is declared, plus naval engagements. This would mean that, for a colonial war declared over colonies in North Americas, 100% warscore would come from occupying all colonies or colonial nations in that theatre, and occupying or ceding provinces from the homelands are disabled. This would go a long way to stopping any colonial war turning into WW1!
This would also mean that a native nation wouldn't have to occupy Europe for a non-conquest CB.