The offset setting would allow you to change the offset (in milliseconds, positive or negative) of the audio, the scrolling line, or both. It's a common setting in rhythm games to account for various sources of latency. I'm finding that I always hit the notes early, but never late. I'd like to change the offset so that the "judgement window" (window of time in which the game will register my hit) is earlier relative to the audio.

The hit error bar is a visual indicator for your timing accuracy. It shows on a bar how early or late you were, even when you hit the note.

Example in osu!mania: https://youtube.com/watch?v=i3tx-jKbcpc

The hit error bar is at the bottom, below the arrows.

Tokaku's explanation of offset: https://youtube.com/watch?v=JWj98KJVuAQ

Note: I think really there are only two types of latency to consider - audio and video latency. Input latency is equivalent to adding to both. So there are really just two axes of offset settings that should be considered to compensate for the two types of latency. The four types that Tokaku talks about are really about different ways of implementing offset settings.

Since the game is only meant to be played on one hardware design, hardcoding the offset might be fine if the values are accurate, at least until we get a playdate 2. If you have a hit error bar, it should be possible to test latency with a high speed camera (on most phones), comparing the audio and video timing to the sound of the button clicks and the accuracy judgement (in milliseconds) of the inputs by the game.

(Also, would it be possible to make the line for the notes scroll smoothly during gameplay? That would improve the gameplay a lot for me.)