When the CT1 was first introduced, there were still lots of 402 and 202 units around. Many of those had wet cell lead acid batteries in them. The battery packs for the original CT1s were designed to make it easy for photographers to switch over from 202s or 402s - they included the switch to permit using those wet cells.

Later versions of the CT1s and the CT-2 came with a battery pack that only had two positions for the switch - dryfit and nicad.

Is there anyone else here who remembers using an eye dropper and a bottle of distilled water to help maintain a healthy battery for their Metz flash?

At the very least I would expect that the internal resistance of the various battery types would differ - maybe the switch position takes that into account.