You are right, a decay of 0 means no decay, 1 means linear falloff, 2 is quadratic (physical), 3 would be cubic and so on.
From what I know from our Maya and C4D implementations, the key to getting lighting when using falloff is to increase the Flux. Otherwise a light that has standard settings and looks good in no decay mode will become too dark when you enable the falloff.
The idea (as far as I remember the explanation by the original developer of Krakatoa) was that at a distance of 1 unit, you always have the same illumination regardless of the decay mode. So let’s say the units are meters and at one meter you have a certain amount of light. When you change the decay exponent, you should still get the same illumination at that unit distance (because 1/(distance^E) is 1 at distance of 1.0 regardless of E), but it also means that the light becomes “hotter” as you measure closer to the source, and a lot darker when you move away (at 2 units it would be 1/4th, and 3 units 1/9th etc. with E=2)
So you might need to boost your Flux value A LOT if you expect to see illumination at any significant distance, esp. since most 3D apps default to 1 unit assumed to be 1 cm. So at 1 meter (100 cm) there would be barely any light left (only 1/10000 of the original intensity).
Note that this light behavior does not conform to the light implementation of 3ds Max where Krakatoa was originally developed, so there has always been a bit of a learning curve figuring out the lighting…
Hope this helps.