Yes it can. If the camera just does a simple average of pixels when reducing the image size then it would have the effect of reducing the noise in the image. The camera could go a step further than that and do some more clever processing along the way, though I'm not sure if any of them do.
Of course, any noise reduction that the camera can do by downsampling the image, you can also do
better in a photo manipulation program after the fact.
But yeah, if the camera's downsampling does a decent job of noise reduction, and you don't need the high rez, then it could save you the postprocessing step.
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