This causes messages to be rejected on services like Amazon SES that do not allow users to send emails from domains they do not own (see here). The proper behavior (used by Special:EmailUser) is to set "From" to an email address specified by the site administrator (e.g. PasswordSender or the SenderEmail config variable) put the user-provided email address in ReplyTo.
The extension currently evaluates $wgUserEmailUseReplyTo and sets ReplyTo if true, but does not change the sender to the site-configured email address.