Ok, I just setup a test file for the same scenario and preferences you have setup, and it looks to be working for me.  I'm just wondering if I'm missing something.

1.  I bring up Receive Payments

2.  I select the Customer I need to apply the credits for in the Customer:Job field at the top of the window

3.  I see the 3 open invoices listed in the 'Outstanding...' area, and in the bottom right I see my existing credits amount

4.  at this point I just put a checkmark next to the 'Apply Existing Credits' at the bottom right of the form

5.  from here QuickBooks automatically checks off the first two invoices for me, applying the credit in full to the first invoice, and then the remainder of the credit to the second invoice 

6.  if I click Save at this point, the credit is saved and applied to those two invoices for me.

If this is not happening for you, you might want to close out of the receive payments window, and then reopen the receive payments form.  Then try the above steps, that should allow you to do this.