ReadyNas 422 firmware 6.10.4, active directory users don't authenticate when Ad is offline

I don't think the option will cache or not cache user credentials, but rather it is a means of keeping (caching) user profiles in the database so that you can set permissions on shares for AD users and groups, etc.

https://kb.netgear.com/28038/ReadyNAS-OS-6-Do-not-cache-ADS-accounts-locally-option 

I don't have the means to test AD from within my setup but I would think the ReadyNAS will query AD for every auth attempt - sounds like it from your description.

Most ReadyNAS scenarios/use cases would probably be NTLM authentication and I expect this to be transparent to the ReadyNAS - i.e. the NAS just forwards the auth requests to the Domain controller(s). There might potentially be a small cache timer somewhere (like 5 mins or something) to limit the amount of potential Auth requests sent to AD but I would not expect this to be an "indefinite" cache until AD is online again, as you suggest, and do not think it has relation with the: "Do not cache ADS accounts locally" option.