g_man1990,
That message appears when you try to specify a location in the workspace .metadata directory, in the “Custom location” text box. The workspace metadata location is used internally when you select “Workspace metadata” and may not be entered directly by the user. Apologies for the obscure way the error message is worded; I’ve raised a bug to improve that.
Changing the runtime will not affect this particular error.
Note that you can get more information on each of the options by hovering over the yellow light bulb icon just to the left of each option. In addition, there is some information about this in the learning center article here: MyEclipse Application Server Connectors.
Sorry for any inconvenience.