Settings API enable default settings on theme install?

You can pass defaults to get_option. The second parameter is a fallback.

$default
(mixed) (optional) The default value to return if no value is returned (ie. the option is not in the database).

    Default: false

So, for example, instead of:

  $options = get_option('plugin_options');

You’d want:

  $options = get_option('plugin_options',array('display_sidebar' => true));

Or you can insert your default options with add_option, which is “A safe way of adding a named option/value pair to the options database table. It does nothing if the option already exists.”

I’d do the latter. It should be easier.