Yes that feature is disabled. After the upgrade to vBulletin 3.xx, the PM tracking feature was an annoyance to a lot of members......instead of having a checkbox like the old vBulletin, the new version pops up a window asking 'Request a read receipt for this message?'.
So after EVERY private message was sent, you HAD to click on another button...a bunch of members complained about it, so the feature was removed for regular members.