This page in the online help (i.e. when you press F1 in Workbench) contains the following:
Allow inline links - Allows inline links in a field that uses the sys_EditLive or sys_EditBox control.
We’ve just had a problem diagnosed for us by Percussion UK Technical Support, which was traced to the Allow inline links checkbox being ticked for a field whose control type is sys_EditBox. Hence I believe the above to be incorrect, and sys_EditBox controls cannot allow inline links. (For future reference, this resulted in a Content is not allowed in prolog.: {1} error when attempting to save an item on this type using the Content Editor.)
This option is not directly documented in the PDF manuals.
Andrew.