incorrect. The shysters at ATT inserted a shim between you and the phone's native functionality that prevents you from activating this. I'm not really sure how this shim works, but one hypothesis is performs a network check to see if the phone is still under ATT contract. I don't know for sure though.
On my Titan it used to say this, but then one day it just stopped and now I can enable internet sharing, so I could only guess it was doing some sort of IMEI number check.