What will actually happen if I disable this, other than it's sorting by depth? If enabled, in what state it will sort?
If you disable it, all sorting happens based on the depth. If you enable it, opaque objects will be sorted by state (i.e. textures, shaders,...) and transparent ones by depth. That's usually the faster way, but if want to reorder opaque and transparent ones by using setSortOffset(), it won't work well.
Anyway, I would try it without that deferred stuff just to see if that changes anything.