Feature request ticket at the issue tracker here: http://forum.cockos.com/project.php?issueid=4139
Previous discussion on the subject here: http://forum.cockos.com/showthread.php?t=49329
Contrary to what one would think and what was said in the discussion thread above, "reduce envelope point data when recording or drawing automation" does not seem to do what one would expect. In fact for me it doesn't seem to do anything, and I suspect it only removes entirely redundant envelope points which have the same value as the preceding one. Or is this a bug?
If it's not a bug, then Reaper desperately needs a feature of automatically reducing number of envelope points after recording automation in real time (either with a MIDI controller or by the mouse). The user should also have some kind of control to the strength of it (i.e. how much the data is simplified/reduced). This is a basic feature in most hosts. In Cubase, for example, you can set the (automatic) automation reduction level to anywhere between 0% and 100%. Now in Reaper you have to "reduce number of points" manually for each lane in order to make it at all feasible to edit that data by hand.
IF, however, "reduce envelope point data when recording or drawing automation" is supposed to do this, then this should be a bug report, where the only feature request would be to allow the user to control the strength of the reduction.