Yes, but only when combined with the options to disable privileged IO and writes to KMEM. I might be missing another that needs to be enabled ... it's 2am
Have a look at the help files for those options, it'll give you the full details.
Disabling LKM (Loadable Kernel Modules) is one way to prevent the insertion of a kernel rootkit - but there are other ways to do it (via ioctl and /dev/kmem and mmap) so turning this feature on is pretty useless w/o turning on the others. With all these respective options enabled, inserting a kernel-level rootkit at runtime is impossible, thus greatly increasing security.
If you enable this feature I would suggest that you also enable the SYSCTL feature ... and write to /proc/sys/kernel/grsecurity/disable_modules on boot. This way your kernel will still accept modules from your mkinitrd file at boot time, which makes switching hardware not needing to recompile your kernel, and will disallow insertion of any other module after boot time.
You *could* build in all your modules and not use a mkinitrd at all, and that would be a little bit of additional security; but using the RBAC system will prevent someone from replacing your mkinitrd with malicious kernel modules, and I would only recommend removing your mkinitrd from the boot process if you really know what you are doing.
Hope this answer your question.