You ARE set up for MDC by your firmware and FPU versions and it looks like you have programmed the portable for MDC. Now let me release a little air from your balloon. This is not a full featured option as in fleetsync (which Kenwood would like you to use anyway).
Yes you can encode a PTT ID, emergency, and radio stun in MDC-1200. you can also receive PTT IDs, emergencies and yes have your radio stunned. What you cannot do is selective call. This is why it does not show in the OPT SIGNALING pull down (which is for receive muting only). Kenwood is flexing its muscles and wants you to use their proprietary format, not the other guys.