I apologize that this comes late, but I've finally found the printed Altera booklet where this information appears. It's named "qil51006-5.0.0" and dated May 2005. In chapter 5 ("Design Recommendations for Altera Devices"), in the "State Machines" sections, the second bullet says:
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Assign a default clause or statement to direct the state machine if it accidentally reaches an unused state.
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It doesn't say anything about minimizing such clauses automatically in this section, and nothing about the safe state machine option.