Yup - with the option checked, as noted above, when you highlight a midi track, it should automatically set the midi Input Echo On to On, and when you click to highlight a different midi track, Sonar should turn it off for the track that is no longer highlighted, and should turn it 'on' for the newly-highlighted midi track.
You can manually turn additional midi track's midi input echo on on/off, if you want to hear a layered sound from multiple midi instruments responding.
Hope that helps,
Bob Bone