Here's the contents of the message I got:
You are receiving this message because somebody told our site that you had lost your password. If this is the case, read the instructions below. If you don't have a clue what this is, then you are safe to delete this message, and we thank you for your time.
The following code has been generated randomly generated in order to verify the user account. when you click on the link below you will be presented with a field to enter this code. Normally the field is pre-completed for you, but incase it isn't the code is: SQVVTPCUYT
Clicking on the following link will take you to the website where you can enter the above code, and reset your password:
http://mysite.com/index.php?mact=FrontEndUsers,cntnt01,verifycode,0&cntnt01input_uid=632&cntnt01input_code=SQVVTPCUYT&cntnt01returnid=78
I changed the sitename .... but that's it.
Now for part 2.
Yes..... the 'Allow duplicate "forgot password" reminders?" setting assumes that:
a) you've created a property of type 'email address',
b) associated that property with one or more of your groups, (marked it as optional or required, and given a sort order to it).
c) that the user belongs to one or more of those groups,
d) that the user requesting the lost password setting has a valid email address set.
(you should be able to see all of this when you edit the user)