In that dialog you're just supposed to enter the color space you want to work in - sRGB, Adobe RGB, ProPhoto etc.
It doesn't really involve the full color settings. In any case, the document profile will override the color settings.
But yes, this rolldown has an annoying habit of defaulting to "don't color manage", which makes no sense. It should either be the last used, or working space. But as long as you're aware of it, it's not a big deal.
I'd recommend setting up this in order to have full control of the document's color space. That way, you always know at a glance: