You do not change mods from that list. You need to go to the Gameplay + Speed tab and click on the drop-down list in the Selected Mod field. A picture has been attached to this post for your reference.
The drop-down list at the top of the window applies only to standalone mods, i.e. mods that do not require any component of FS2_Open, such as the mediavps, to run. However, all standalone mods can still be run normally from the Selected Mods list. For instance, The Babylon Project, despite being standalone, can still be run as a mod if you place the relevant vps into a new subfolder and use the Selected Mods list to choose that folder.
On an additional note, if you want to run FS2 with retail eye-candy, all you need to do is select the text in the Selected Mods field and delete it. This disables all mods and runs only the vps stored in the root folder.
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