The below setting is somewhat misunderstood:

If you are to set this setting, what is passed to the Message Box, and what is the behavior.

To simulate this, I created a send port with the following setting:

When I ran the 867 (found in the samples folder of the SDK) I got the following error message:

There was a failure executing the send pipeline: “Microsoft.BizTalk.DefaultPipelines.XMLTransmit, Microsoft.BizTalk.DefaultPipelines, Version=3.0.1.0, Culture=neutral, PublicKeyToken=31bf3856ad364e35” Source: “XML assembler” Send Port: “EDI Drop Off” URI: “C:\Users\Administrator\Documents\Visual Studio 2008\Projects\EDI\Output\%MessageID%.xml” Reason: This Assembler cannot retrieve a document specification using this type: http://schemas.microsoft.com/BizTalk/EDI/X12/2006/InterchangeXML#X12InterchangeXml.

I could not find the schema in the BizTalk 2009 folder.

Here is the data that is created by the EDI DASM with the Preserve Interchange setting:

<ins0:X12InterchangeXml DelimiterSetSerializedData="126:13:10:42:58:-1:-1:-1:-1" xmlns:ins0="http://schemas.microsoft.com/BizTalk/EDI/X12/2006/InterchangeXML">
  <ns0:ISA xmlns:ns0="http://schemas.microsoft.com/Edi/X12ServiceSchema">
    <ISA01>00</ISA01>
    <ISA02>          </ISA02>
    <ISA03>00</ISA03>
    <ISA04>          </ISA04>
    <ISA05>ZZ</ISA05>
    <ISA06>7654321        </ISA06>
    <ISA07>ZZ</ISA07>
    <ISA08>1234567        </ISA08>
    <ISA09>991221</ISA09>
    <ISA10>1226</ISA10>
    <ISA11>U</ISA11>
    <ISA12>00401</ISA12>
    <ISA13>000000025</ISA13>
    <ISA14>0</ISA14>
    <ISA15>T</ISA15>
    <ISA16>:</ISA16>
  </ns0:ISA>
  <FunctionalGroup DocType="http://schemas.microsoft.com/BizTalk/EDI/X12/2006#X12_00401_864">
    <ns0:GS xmlns:ns0="http://schemas.microsoft.com/Edi/X12ServiceSchema">
      <GS01>TX</GS01>
      <GS02>01</GS02>
      <GS03>1234567</GS03>
      <GS04>19991221</GS04>
      <GS05>1226</GS05>
      <GS06>2</GS06>
      <GS07>X</GS07>
      <GS08>004010</GS08>
    </ns0:GS>
    <TransactionSet DocType="http://schemas.microsoft.com/BizTalk/EDI/X12/2006#X12_00401_864">
      <ns0:X12_00401_864 xmlns:ns0="http://schemas.microsoft.com/BizTalk/EDI/X12/2006">
        <ST>
          <ST01>864</ST01>
          <ST02>3313</ST02>
        </ST>
        <ns0:BMG>
          <BMG01>00</BMG01>
        </ns0:BMG>
        <ns0:DTM>
          <DTM01>001</DTM01>
        </ns0:DTM>
        <ns0:N1Loop1>
          <ns0:N1>
            <N101>001</N101>
          </ns0:N1>
          <ns0:N2>
            <N201>N201</N201>
          </ns0:N2>
          <ns0:N3>
            <N301>N301</N301>
          </ns0:N3>
          <ns0:N4>
            <N401>N401</N401>
          </ns0:N4>
          <ns0:REF>
            <REF01>01</REF01>
            <ns0:C040>
              <C04001>01</C04001>
              <C04002>C04002</C04002>
            </ns0:C040>
          </ns0:REF>
          <ns0:PER>
            <PER01>1A</PER01>
          </ns0:PER>
        </ns0:N1Loop1>
        <ns0:MITLoop1>
          <ns0:MIT>
            <MIT01>MIT01</MIT01>
          </ns0:MIT>
          <ns0:N1Loop2>
            <ns0:N1_2>
              <N101>001</N101>
            </ns0:N1_2>
            <ns0:N2_2>
              <N201>N201</N201>
            </ns0:N2_2>
            <ns0:N3_2>
              <N301>N301</N301>
            </ns0:N3_2>
            <ns0:N4_2>
              <N401>N401</N401>
            </ns0:N4_2>
            <ns0:REF_2>
              <REF01>01</REF01>
              <ns0:C040_2>
                <C04001>01</C04001>
                <C04002>C04002</C04002>
              </ns0:C040_2>
            </ns0:REF_2>
            <ns0:PER_2>
              <PER01>1A</PER01>
            </ns0:PER_2>
          </ns0:N1Loop2>
          <ns0:MSG>
            <MSG01>MSG01</MSG01>
          </ns0:MSG>
        </ns0:MITLoop1>
        <SE>
          <SE01>18</SE01>
          <SE02>3313</SE02>
        </SE>
      </ns0:X12_00401_864>
    </TransactionSet>
    <ns0:GE xmlns:ns0="http://schemas.microsoft.com/Edi/X12ServiceSchema">
      <GE01>1</GE01>
      <GE02>2</GE02>
    </ns0:GE>
  </FunctionalGroup>
  <ns0:IEA xmlns:ns0="http://schemas.microsoft.com/Edi/X12ServiceSchema">
    <IEA01>1</IEA01>
    <IEA02>000000025</IEA02>
  </ns0:IEA>
</ins0:X12InterchangeXml>

So what can consume this message?

If you look at Preserving a Received Batched EDI Interchange, it does not explain about what happens to the document.

If you look at Sending a Preserved Batch Interchange, it will recreate the interchange based on the settings described on the page.

I asked why there is this option, to preserve interchange, getting a document that is only consumable by the EDI ASM, and was told that you can create a map that transforms all of the EDI transactions from one to another and keep the batch together, however this does not seem correct, because a map would be looking for a MessageType of http://schemas.microsoft.com/BizTalk/EDI/X12/2006#X12_00401_864, not http://schemas.microsoft.com/BizTalk/EDI/X12/2006/InterchangeXML#X12InterchangeXml

It seems that this is only for validation, or re-enveloping.