Peter,
Selecting Paper-colored gray allows the color of the paper to affect the neutrals, while Neutral gray attempts to make grayscales as neutral as possible until there is insufficient ink coverage to do so. On media with a distinct color cast -- the war tone of Hahnemuhle Bamboo qualifies here -- using Paper-colored gray gives a smoother transition from paper white to almost white. Visually, this often reads as more neutral than when the ink attempts to override the natural paper color.