Fahad,

I believe this is working as intended. Choosing email as username hides the username field in the Registration form (and, I'm assuming populates the username field with the user's email address).

This is probably done in case you have a situation where you need multiple logins for the same email address.

Right. You'll still see that if you use Admin, Users, Add User.

If you have a REGISTER link on your site, then the Username field is hidden.

Portal administrators still have the ability to specify a username when creating a new user (and would simply type the user's e-mail address as the username if desired).