I thought I read somewhere that the option for recording quality > "Same as Stream" referred to the quality (and compression) of thew incoming stream. This would also explain why the message "Warning: Recording can not be paused if recording quality is set to "same as stream"
That message is because the encoder needs to do something special at the start and end, and has no actual concept of pausing. "Pause" is just a UI thing; it's actually a full stop and start under the hood. If you're streaming the output, that takes priority of course, and so the encoder is not going to start and end in the middle of that stream, like it would have to to pause the branch that goes to the file. Thus, unavailable.
If you have a dedicated encoder to feed the file, then of course it can start and stop all you want.
I do not understand why the "streaming" (output) settings would be permitted to confuse the "recording" (output) settings since they are completely different.
It actually goes the other way. The stream takes priority. It has its settings, which always control the stream, and the recording has its settings. One of the recording settings is to siphon off the stream instead, post-encoder, and not use its own encoder at all.
That's what "Same as Stream" does, at which point the recording settings mean nothing at all because the encoder that they control is not running.