The ability to "Embed Interop Types" is only possible if your project is based on the .NET 4.0 framework (or later).
If you are using the 2.0 or 3.5 framework then you won't see this for project references in Visual Studio.
I mentioned this because Ken said that this option was not present in his version of Visual Studio. I think that it is present but only if you use the later frameworks.