Hi,
We do not have a checkbox for “nofollow” for Internal Links. So I assume you mean you have unticked “Overwrite existing values” under the follow/nofollow dropdown.
If that box is unchecked WP External Links will leave the value as it already is and will only add the selected follow/nofollow value to links that do not have it.
As for SEO, that is a very complex topic, but generally your internal links should be “follow” or have no explicit relationship attribute set. But it depends on what you are linking to and how you wish for it to be displayed on search engines. You can search online for “seo starter guide” and read the details for any search engine that you are interested in.