You are free to tinker with it if you want. It runs at low priority and only once per second, so it is not a burden on the CPU. Plus, it is interrupt driven, so the CPU does not wait as the characters go out on the serial port.
You can change what comes out, if you like, or keep what is there. The way it works is that you use sprintf to convert the variables that you are interested into an ASCII string, which then gets sent out through the spare serial port, once per second. You can send any of the global variables in the firmware that way.
The only thing you have to be careful with is the buffer size that is used by the sprintf function to create the ASCII string. The buffer must be large enough to handle the largest string.
You will know if you overflow the buffer, there will be some strange, non ASCII characters coming out.
Also, if you change debug_output(), it would be good idea to test it thoroughly on the ground before you use it in flight.
The fails safe behavior of MatrixNav and AileronAssist firmware depends on the fail safe behavior of your receiver.
If your receiver does not have a fail safe, then the firmware will detect an out-of-range condition and will return your plane to the launch point. However, these days most receivers that do not have a fail safe are usually poor quality, and are likely to cause other problems, so I do not recommend them.
Therefore, you must understand the fail-safe behavior of your receiver. I recommend receivers, such as the Castle Creations Berg microstamp receiver, that allow you to program in the fail safe behavior.
What I do is to program the receiver to put the firmware into either RTL mode, or waypoint mode, depending on which version of the firmware that I am running. In the case of waypoint mode, I always make sure that the first point on the list is nearby, so then there would be a chance of the radio regaining the signal.
On some receivers, the fail safe behavior is to continue the last received pulses. In that case, the plane will just keep doing what it was doing when the signal was lost.