Those settings in the backend are only defaults and really you should not change those because they will be updated according to config files whenever you upgrade. That backend allows developers to manually install and configure features but we don't use that for included features because we also have an installation system that allows installing features by config files so you can just upload the feature and visit the setup page.
Each instance of feed manager gets its own settings, when you first add a feed manager to a page it gets the default settings. You can edit the settings for the feed manager instance by clicking the gear icon next to the title. There are no new fields when selective publishing is enabled. Add a feed for it to consume and with selective publishing enabled you can pick and choose which if any items in the feed to publish. With selective publishing disabled it just uses all of them. So its a way of filtering out posts when you don't want all the posts in a given feed. For example you could subscribe to a bunch of blogs and then just publish the best posts that you read. So I could for example aggregate a bunch of blogs and feeds about content management but selectively publish only the gems and filter out the noise thereby adding value to my feed about content management.
Hope it helps,