I've noticed i can't use that tab to pick associated application services. 

The stop appearing in the available list of application services after the following occurs:

1. If i create a new application service and link it to no CI's at all -- it is visible on this list to other application services of parent application services. 

2. If the parent application service I link to CI's e.g. using the manual method of linking the application to CI's.  It stops being visible on this list. 

From this I infer a service can only be a parent application service if that application service has no associated CI's bound to it. 

Is this intentional?

The only way I can see to map application services dependencies is if I go directly to CI Relationships and add a record there.