The ability to change a master page with out-of-the-box features is only available with MOSS as it is part of the WCM layer. WSS alone doesn’t provide any of these capabilitie.
The “Master Page” link in Site Settings is added when the Publishing Features are activated. It’s not an issue, it’s by design.
If you want the user to be able to change the master page through the WSS UI you will need to create a custom solution for that using an application page and a feature to add menuing options to that application page.
Check out Renaud’s master page switcher on codeplex.