Site Settings -> site collection settings -> search settings
- The second radio button option "Do not use custom scopes. Display results in the search results page (/_layouts/osssearchresults.aspx)." is meant for the "This site" entry in the drop down.
- The forst radio button option "Use custom scopes. Display richer results using the following Search Center:" is meant for custom drop down items like "people" and "All sites" options.
- To select this option, you need to have a "search center" team site. this team site will be created automatically if you have enterprise sharepoint edition, if you do not have enterprise version, create a search center site. ( site actions -> Create -> website -> Enterprise tab -> search center with tabs)
- Once you get the site, get the URL copied and pasted into the "Do not use custom scopes. Display results in the search results page (/_layouts/osssearchresults.aspx)." option text box.