DirtyDan GrapheneOS currently only uses Wi-Fi APs for network location.
Would turning this on erode battery life since it's still scanning for bluetooth connections (even if it can't find any)?
No, this toggle only allow apps with Nearby Devices + Location permissions to do Bluetooth scans while Bluetooth is otherwise off. Wi-Fi toggle similarly only allows applications with the Location permission to do Wi-Fi scans while Wi-Fi is otherwise wise. Both toggles only have to do with using them for scans while you have them turned off. Neither needs to be enabled for scanning if you always have them enabled. They exist to allow scanning for location detection without having them turned on. On the stock OS, they're on by default.