After I click on "Change Players", I cannot see any little letters next to each player and AIs. If I start the game straight away,then it becomes a full distribution game and I can pick 4 lands to start with.
When you enter the scenario on the Initial Distribution tab, there's another drop down at the top you need to set to "Automatically distribute territories to players."
If you have it set to "Let players choose where they start", as you do, then the scenario just defines which territories are available to choose from. Change it to automatic and it should do what you want, and you'll see slots on the player screen.