You need at least the 1.0.1 update for the 10.1 release.
Available from
there select the 'download tab'
and download/install
MCU 10.1 Update for Windows: Adds Kinetis K50 family support, Processor Expert support for Kinetis 144, 100, and 80 LQFP packages, and Kinetis example projects.
Size (K): 275127 Format: zip Rev #: 1.0.1 Modified: 8/15/2011
Then the option should show up.
BK
I see that you have CW installed in C:\program files. If you are using Vista or Windows 7: make sure you run the update as administrator. Otherwise Windows might deny installation of files.
BK