It is worth noting that the "Get Latest on Checkout" feature requires server support to function.  In other words, you must connect to a TFS 2008 (or later) server for Get Latest on Checkout to work.  There has been some confusion in the forums because the Get Latest on Checkout option appears to be configurable on the client even when connected to a TFS 2005 server.  It is unfortunate that we do not disable the Get Latest on Checkout configuration options under Tools->Options->Source Control and under the Team Project settings in this case, but these options are meaningless if you are not connected to a TFS 2008 server.