I've never used the average annual release method, so I can't speak to its usefulness. If there is no manipulation of the outflow, then I'd say you'll almost certainly want the targeted release option, where release from the reservoir is dependent on the difference between the current reservoir volume and its "target" volume -- let's call that volume the "available volume" for release. The NDTARGR parameter is just the inverse of the fraction of the available volume that is released each day. If NDTARGR = 2, then half is released the first day, half of the remaining available volume is released the next day, half again on the 3rd day, and so forth, in a geometric series. For some reason, NDTARGR is typed as an integer in the FORTRAN code; it would be useful in some cases to allow it to be real. Allowing a stage-discharge table or equation specific to each reservoir would be an improvement, but this NDTARGR method seems to work in most cases.
SWAT will normally try to determine the "target" volume based on soil moisture, to manage the reservoir for water supply, but to minimize the prospect of flooding during the "flood" season. Such SWAT-determined target volumes will be larger than the principal volume, to hold as much water as possible (unless it's flood season...). These details just don't apply to many reservoirs, and certainly not to natural lakes and unmanaged reservoirs. To avoid this soil-moisture stuff, give SWAT explicit monthly target volumes. In your case -- set these all equal to your principal volume, which should be the reservoir volume right at the outlet threshold.
Cheers,
-- Jim