Or should I use edge loops to smooth out the edges of the low poly object, bake, remove the edge loops, and then apply the hard edges and have the low poly model with the hard edges utilize the baked normal map?
Yes. Hard edges, and seams on every hard edge. You won’t get correct normals if you alter them between bakes, because normal maps are tailored specifically for the geometry/normals that exist pre-bake. It is possible to bake using averaged normals, but usually it introduces wireframe seams at slight distances and doesn’t translate well into games.
What happens if you don’t use seams on every hard edge? A common uv mapping tutorial has people mark seams on a cube in a way that won’t separate the faces on the UV map, so the end result is just one island. If I wanted to bake smooth edges on the cube, would that mean I should have an island for each face on the uv map?
That Handplane vid is very informative. I remember it was among the videos that finally made it click for me.
To offer some more insight; Normals are forced to be cut off on hard edges because a hard edge is technically an edge split done at render time. Without a seam, there is no way for the raycast to know to extrapolate a normal gradient across an edge. It’s counter-intuitive at first, because you’d think that a seam somehow splits an edge even more, but it’s essentially the opposite. A seam tells the baker that the raycasting should continue across, even if the edge is hardened.