Quick reply from someone who has a very limited understanding:
Auto runs RWD but activates front if senses slip. There is always "some" engagement with the front which will potentially lead to premature wear (and less gas mileage?).
In general, no need for Auto in the conditions you describe. Use 2wd for dry pavement, Auto for Rain/Snow type conditions on pavement. You said know about 4wd hi/lo.