I have a Latitude C400 mated to a port replicator with an external display. When I close the lid of the notebook the external display turns off; using fn + f8 doesn't seem to help. It didn't use to work this way: I could close the notebook and the external display continued to work.
The power setting your recommend is and has been the one in use.; the setting is set to None for action when the lid is closed. Note that the computer does not turn off when I close the lid, only the external (and internal) display.