I've spoken on the Steam forums and that option only disables stuff in prerendered cinemas. Blood and gore is still in the game proper, which seems rather pointless of an option. I'm not really sure I'd even say I'm squeamish, I've just noticed that witnessing realistically rendered gore and dismemberment in media has a negative effect on my psyche. It depresses me and makes me feel dehumanized.
I used to be very into horror and violent media, I wouldn't bat an eye at this. I don't know if it's the realism of the graphics or just being unsettled at the trivialization of death and desecration of corpses for entertainment, but it's not something I can enjoy anymore and it actually detracts from not only my enjoyment of the game but affects my mood in real life.
