Does this just affect the "auto craft limit" so it stops crafting if there is any fluid in the output
Correct. No fluids are lost; fluid crafting machines just stop crafting sooner if their outputs are blocked.
That being said: if you add this mod to a saved game where some of your machines have full outputs, it's possible that some of those fluids will be lost when the game is loaded - I haven't tested this scenario. But this won't be an ongoing effect, just a one-time thing.
