It's not possible to convert an existing mailing list to an external mailing list. You have to create a new one.
The block doesn't show up when no external mailing lists are configured, once one has been configured you can either wait for the block cache to expire or manually flush it via the Forum Blocks manager and then your block will show up
How do I get the external mailing lists configured?
Is this the External Mailing List Yes / No Element? ...which I can not seem to figure out how to change it to Yes.
Changing mailing list type is not supported due to the fact that it would need to un-subscribe all existing subscribers in order to make room for the new "fake users" (i.e. email addresses) that are signed up for the external list.
The two mailing list types read from different "user" tables (since external mailing lists are non-vBulletin users).