I am designing a laser driver circuit using the WLD. On page 11 of the datasheet there is a discussion about choosing RLIM. Apparently, RSENSE sets the allowable current range of the laser driver, and RLIM then limits the actual current limit to something less than what RSENSE allows. Is this a correct interpretation?
Your interpretation is correct. See the Method 1 section on page 11 of the WLD3343 Datasheet for an example of how to use the normalized maximum output current to calculate RLIM.
Alternatively, you can use Equation 7 along with Table 4 on page 11 of the datasheet to calculate the current limit resistor value in a slightly more precise way.
Additionally, you can use the online WLD Circuit Calculator to automatically determine values for external components.