Okay, let me see if I actually understand this myself.
There are two separate scenarios you need to consider in terms of the input:
1) Something like a DTS or DD film track, which includes a dedicated subwoofer channel. The other channels won't contain anything below (typically) 80 Hz.
2) Something like a stereo or Dolby Prologic II setup where there is no dedicated subwoofer channel, and all channels go all the way down.
If you set a speaker to "Large" then the processor will send to it any signal originally intended for that particular channel, regardless of frequency. If you set it to "Small" the the processor will reroute any signal below a given frequency to somewhere else, ideally a subwoofer. You often also have the option to set a subwoofer option to "off", which would mean there is no subwoofer present.
So, some examples:
1) You don't have a subwoofer at all. Your front speakers are floorstanders, centre and rears are satellite speakers. In this case you should set the subwoofer or LFE option to "Off", the front left and right speakers to "large" and the other speakers to "small". For a 5.1 source the subwoofer channel will end up being redirected to the front speakers. For a stereo or 5.0 source (such as DPL II) any bass signal intended for either the front left or front right speaker will go to the speaker in question; any bass signal on any other channel will be redirected to the front pair.
2) As above, but with a subwoofer. In this case you would want to set the sub/LFE option to "on", so that the subwoofer channel for DD or DTS gets sent straight to the subwoofer. Satellite speakers are set to "Small", so any signal that would otherwise be sent to them in (say) DPL II mode will get redirected to the subwoofer. Now, what about the fronts? You might want to set the front speakers to "large", in which case any bass sent to them in DPL II or Stereo mode will go straight there; or you might want to set them as "small" and redirect their bass to the subwoofer, because the sub may well do a better job of it.
3) If all surround speakers are satellites then should all be set to "small".
In addition you may also be able to play with the cross-over frequency for speakers that are set to "small". So if you had a pair of floorstanders at the front that are good down to 60 Hz but satellites at the back that only go down to 80 Hz then you could redirect anything below 80 in the rear channels, but only anything below 60 in the front channels.
A really heavy duty subwoofer, as Ian says, goes way lower than 60 Hz. The famous Velodyne HGS-18, for example, hits -3dB at 15Hz, but makes some noise lower still. It's most unlikely that a floorstanding hifi speaker will be able to achieve this. Of course you do have to rely on the processor's bass management working - some processors might make enough of a hash of it that you're still better off sending front bass signals to the front speaakers and losing the low end.