From memory, the options exist in the IDE regardless of whether or not the required binaries and libraries are there. It seems to me, then, that you may not have installed the proper packages. The error message seems to indicate this. It took me a long time to get everything set up properly, even on Linux.
Now I have no choice but to install linux and work directly on the target platform.
This should not be necessary, but I suppose it is worthwhile to point out that
the Wiki page on cross compiling indicates that compiling for Linux from Windows is much more difficult. Sadly it does not state why, which is a glaring omission.
If I had to guess, it is because the project was developed primarily on POSIX compliant operating systems and the build tools are hard to run in Window's command prompt or PowerShell. However, Cygwin is POSIX compliant, and you should be able to run all of the build tools within Cygwin. It should add no dependency on Cygwin to the produced Lazarus/FPC or to your program, and will not affect your license.
So, install Cygwin, make sure you have the "build-essentials" packages (make, etc.), and try to build Lazarus/FPC. Or use fpcupdeluxe which I suspect does most of the same thing, e.g. making sure environment variables are set properly. Personally I prefer to avoid fpcupdeluxe, it seems odd.