the option should be effective.
I just looked into this using data that I imported from a BLAST XML file.
To demonstrate what is supposed to happen, in this example I set the percent identity threshold to 95.
Here is a screen shot of the inspector window.
What you see is that the match header nodes of matches that have less than 95% identity are grayed out and these matches are not used during LCA assignment, whereas the header nodes of matches without least 95% identity are shown in black (they are active during LCA assignment):
Could you please check in the inspector window whether you see the same kind of black vs gray coloring?
If not, please provide a screen shot so that I can try to figure out what is going on.