I noticed that radio button but couldn't figure out what it does. What does it do? Didn't seem to do anything when i pressed it.
The radio button changes whether you are "in" your shuttle or your ship. If ship is selected, you'll be a starship in space. If shuttle is selected, you are a shuttle.
Not very intuitive.
Fun things I've done: Switched to a Tuffli freighter and back with no change in name. Switched my active shuttle (since I have two on the roster) and it changed the name in the UI to the newly selected shuttle, not the ship.
At least for me, I've noticed that the dialog has been using the correct ship name.