Yes, Option would disable Basic on boot. The first Ataris (400 and 800) came with a basic module that you had to put in and then start the computer to use Basic - or likewise Assembler. The module would then use certain parts of the precious 64 KB Ram - actually, much less because the OS in ROM would write itself into RAM on startup and take about 20KB away. So a program or game had about 40 KB space to use. Basic would take some more away. Which wasn‘t a problem on the 800, you would either plug the module in and use Basic but you wouldn‘t if you wanted to load a game. But with the XL, you needed a way to disable the automatic Basic load at boot time, or many games could not use all of the memory they needed. Hence, the Option-option at startup.

At least I remember it this way, but I only had an XL, not the older ones, and now I remember that the 800 had only 48KB of RAM, so it was probably more complicated than that!

> much less because the OS in ROM would write itself into RAM on startup and take about 20KB away.

RAM shadowing of the ROM did not exist in the Atari's (at least not in the original 400/800 models). The ROM's simply were physically connected to actually "be" the top 16KB of the 6502's 64k max address space. The CPU executed the ROM code by directly reading the code from the ROM chips.

Which is also the reason the original 400/800 models were limited to 48k max RAM. 16k of the address space was already used by the ROMs.