There are a couple of distinctions here. First, a work item can [i]either[/i] be Reportable [i]OR[/i] have its sub-items reportable. You'll notice once you check the Reportable box, the "Allow Reporting On Sub Items" box will be disabled. That said, if you want child items to be reported on, you can select the "Allow Reporting On Sub Items" option at a parent level - this will automatically make leaf child items reportable. As far as what to include in a timesheet - that's up to you; however, you most likely want child/leaf items reportable, so when creating a project, you should first ensure its "Allow Reporting On Sub Items" option is checked. Note, also, that the progress of child items rolls up to parent items by default.
Secondly, if you check the "Actual Effort Updated from Timesheets" box, this indicates that your users will not be able to enter actual effort in the work plan and will only be able to enter it in the timesheet. Furthermore, the actual effort and remaining effort on the task will be updated with the information logged in the timesheet.
Have a look at the following section of the documentation for more information: http://help.clarizen.com/index.php/Time_Tracking#Enabling_Work_Item_Progress_Updates_from_Time_Sheets