Sorry for the delay, Hellfire257. Reading the code took some time.
The option you are asking about is part of the Mando Missile system. Basically it allows you to have your missiles disregard the on-board laser designator in favor of a remote laser painting the target for you. Details of this and other aspects of the Mando Missile system can be found here http://www.terra.es/personal2/matias.s/mma_readme.htm
The reason this option is widely believed to not do anything is because it requires use of a designator that uses the MM code as well - so that the missile and designator can interoperate properly. It's easy to add the code as a mission designer to the appropriate items, documented in the web page mentioned previously.
Unfortunately none of the stock ACE equipment have MM-aware designators. :eek So only mission designers are able to make the "Switch to Remote" feature work and few do.
The devs are now quite aware of the lack of stock MM-aware designators and planning to correct this oversight in a future patch.