if they are all on iCloud you would not have to download them to your phone. Turning off iCloud photo library would only break the connection with iCloud so the pictures would not be available on your phone but would still be on iCloud.
the issue I think you are having here is that the iXpand app cannot get the remaining 200 pics from icloud for some reason. Possibly some permissions issue or maybe something else. but to try to determine what exactly is the issue we need to turn iCloud photo library off and see how may pictures and video are actually on your phone and see if all those transfer without issue. If they do then the issue is definitely something with connecting to iCloud.
on a side note if the phone does in fact only have 12 pics on it like it seems then using the iXpand is not going to free up much space. 12 pictures would only free maybe 50 or so MB. unless you have a long video on it as well then it could free up more.