Well, if you're using %1 CPU all the time, you'll get better battery life in ondemand because it's using less power at 165MHz than 400MHz. If you don't ever have any processes preventing the CPU from idling, then 400MHz may actually use less power.

Since it's rare that somebody goes forever without a process sucking up idle cycles, ondemand is a good compromise to keep processes from killing your device in 3 hours doing nothing.

The CPU op-mode and the cpufreq settings have no effect on the SoC's ability to idle components.