The option for Always Show Selection only highlights the selected book. There are other options you need to enable and consider. The first is on the dialog you show. It is labeled "Single Click to Open Books". And if I enable that, I typically also enable the Plus Minus Squares, which I note you have done.
Once you make this change, head to your Project Set Up pod and look at your CHM window definition. You will want to ensure that you have synchronizing the TOC enabled.
Rick will still be in bed right now.
What you are showing is a webhelp window. In theSSL pod, set Microsoft HTML help to be the default, unless you are using Rh10. Then go the Project Set Up pod and create a new window, in Rh 10 you will get an option for the window type.
In the new window you will see the required option.
Make sure you select that window when generating the help.
See www.grainge.org for RoboHelp and Authoring tips