To be honest , it is implemented, but rolled into the Mage Knight choice. If you pick a dummy player the script assumes you are playing co-op or solo and removes the interactive spells and skills for you. If you just choose player Mage Knights only it will assume a competitive game is being played and leave them alone. If you are wanting to play co-op without the dummy that can't be done, but you just need to move his cards back on top of his deed deck and he'll keep going forever.

So if I choose a dummy player, that will remove the interactive skills/spells. But won't that also add in the co-operative skills/spells? My goal is to play competitive but without the interactive skills/spells.

I was going to argue it’s not in the rules, but as you say, page 16. The quick fix is to just search the spell deck and skill piles after setup, and pull them out. The script won’t complain. But I guess I’ll need to add the option now.