But if that is NOT possible then why all the regular settings that one sees on the management GUI?

For security and performance reason Office 365 won't have incoming email enabled soon, but there are client side technologies such as http://www.cloud2050.com/ to let you enable emails in SharePoint.

Cloud2050 Email Sync and Importer (http://www.cloud2050.com) automatically files emails to SharePoint list or document library without any server configurations.

1. Tens of thousands email could be imported and archived in SharePoint with one click.
2. Incoming and outgoing emails are synchronized to SharePoint in real time.
3. No drag-n-drop is needed. All emails are automatically filed into SharePoint.
4. Emails with same topic can be automatically merged into one list item or one document set or folder.
5. Email content can be parsed for SharePoint column data.
6. Email embedded image are kept with the content.
7. Email attachments are saved as list item attachments or files.
8. Email headers are saved as SharePoint column data.
9. Support POP3, IMAP, Exchange and public folder.
10. Support Office 365.

"For security and performance reason Office 365 won't have incoming email enabled soon,..."

How soon is "soon"?