In performing some troubleshooting today for Project Online, I went to "Close tasks to updates" for the plan I was working with and did not find it under Server Settings > Time and Task Management.
Turns out, it moved! Close tasks to update now equals "Locked" in a PWA view.
I had to edit a Project view in Server Settings > Manage Views and add the Locked column to the view.
Then I was able to view my project in the Project view, edit it, and change the Locked value to Yes and publish.
I also found that this column is not available in the Project 2013 client, which was interesting.
All this to say, you want to close tasks to updates, you have to use Locked in a Project Center drill down view of the project.
Originally posted at http://blogs.technet.com/b/brookswhite.