When I go to manage my domain at my registrar, at the section where I need to “Set DNS Type”, it is currently set to “Parked”. If I were to change it to one of the other options (which are “DNS Hosting” and “URL/Email + DNS Hosting”), it will remove the Cloudflare Nameservers. So my question is, do I simply leave this permanently set to “Parked” or do I need to change it to one of the other two options?
Thats a question for your registrar.
As long as you want to use Cloudflare your nameservers have to point to Cloudflare.