Your CPU's default FSB is 266MHz, so that value is reported to the motherboard from your CPU. Manually raising the strap can best be described with a memory analogy. Think of it as loosening the timings in the northbridge. Similar to you changing your RAM timings from 5-5-5 @ 399MHz to 6-6-6 @ 399MHz. I hope that make some sort of sense.
I recall leaving those setting on Auto until I well past 400MHz FSB. I don't remember the defaults right now.FSB termination voltage
North bridge voltage
South bridge voltage