Since iCloud photo library is still in early stages, we are still working out exactly how Picturelife will work with it. Currently, Picturelife will only back up local full resolution photos (and videos). We are looking into how/when iCloud photo library optimizes storage. In the future, we could request full res image data to be downloaded before uploading to Picturelife, but that is not currently implemented.
For now, until we have done some more exploration and implementation with iCloud photo library, the official party line is that you should stick with "Download and Keep Originals" to ensure complete Picturelife backup.
We'll continue to update this FAQ as we have more information.