Back than in UE 4 at some point this switch was functional. As of currently, for UE 5.8 I tried to search in the source code for the usage of ths settings and found really nothing.
In source there is a file PhysicsSetingsCore.h. There in the correspoinding class UPhysicsSettingCore is the property named bEnable2DPhysics. And though the setting is present in the editor. I didn’t find any references in the code for it to be responsible for something. I also found some references to the Box2D license. It seems that at some point the Box2D library were integrated into the Unreal and currently is the innate part of it. And this setting just became obsolete.
It would be cool, though if we had new Box3D library integration as an option