Project Deliverables - Supply Option not working?

Hi All

I have created a project delvierable for which I want to source most of my products from standard stock. It looks if I change the supply option to MRP it should request this from standard inventory but when I raise the shop order for the top level, every line appears as project inventory. This is Apps10 UPD12.

Have I misunderstood the help, or am I missing a function?

THanks!