I don't think the Android setting has any effect on where iFly stores files. The place you want to change that setting is inside iFly, via Menu > Check for Updates > Advanced Options > Change Storage Location. Once you get to the Advanced Options screen, you'll see where the storage is currently selected (Internal (or sometimes "Shared") vs SDCard). Look at the total indicated size of the different storage location options to confirm you're picking the one you want--sometimes the names can be non-intuitive/misleading. (That trick may not help if your SD Card is the same size as your internal storage, though!)
When you change locations, I don't think iFly deletes the data from the location where it was originally stored...it just gets abandoned in place. (That also used to be true even if you uninstalled iFly, though I don't know if that's currently the case.)
If you're not set to use the internal storage, I'm pretty sure you could delete the entire iFly.GPS/files/iFly/Data folder and continue using iFly via the SDCard with no issues, but I've never tried that myself. I'm not sure if it would automatically recreate those folders if you ever opted to switch back to internal storage, though if it didn't, I think you could recover by uninstalling and reinstalling the app.