The purpose of the Charge setting is to have it just charge and not have control of your SD card while attached to your PC. So you would want it in PC mode.
I have only flashed a few roms in the last couple of months after being rooted since last fall. I think all should be the same. I have flashed a couple of versions of MIUI and also have Steel Droid 10 installed. But here is the thread for Liberty, here on DF
I use ezSBF (thread here in D2 Hacks, works great ) when I need to, which has been a coule of times ( learning curve,lol )
That took me back to Froyo and after it is up and running, take the Over The Air Gingerbread update ( there is now a ezSBF file that takes you straight to GB).
Then I used Petes One Click to root it.
Install Clock Work Recovery and D2 Bootstrap
I also have Titanium Backup, to back up all my apps/data.
Now to install Rom
Downloaded the rom file ( zip ) to my laptop, saving it in a file I have named Android ( makes it easy to find ).
Copy the zip to my D2 into a folder I added labeled Roms, on sdcard, so I know where it is.
Now reboot into Clockwork Recovery.
Chose wipe data/factory reset and next screen click Yes.
Chose wipe cache partition and next screen yes.
Next "install zip from sdcard". Find where the zip is and click to install it. When asked if you want to install,chose yes.
After it is done, and you are back to CWR main screen, chose reboot system now.
It will boot into your new rom.
This is how I have done it and works for me. Since you have tried and had to sbf anyway, give this a try. Maybe this will work. But also look over the Liberty Thread. I have not flashed one of those roms, but should be similiar.
Yeah you do need bootstrap to boot into recovery and flash ROMs when you are running stock. ROM Manager does not work well running installs on the Droid 2 or locked bootloaders in general.
Guess that answers that question, lol. You could always try some tweaks without changing to a custom rom. I rooted last fall and found v6 supercharger which works great. Plus the dev also has 3g turbocharger which speeds up your up /down loads. I also played around with Droid Overclock. There are lots of things you can do without flashing a rom now.
If you want most of the effects of a Rom without flashing one I recommend a custom launcher with easily switchable themes such as Launcher Pro or ADW, tools like V6 Supercharger and Milestone Overclock, and something such as Titanium Backup to get rid of all the default processes that slow your phone down and eat up memory.
It seems like there was some way to get Bootstrapper for free that from the developer on the market, but I can't recall for certain. Anyway, it's worth the money to be able to run Roms, so perhaps you should give it a shot.