The TMA (Thrust mode annunciator) will display R-TO when a TO-1 derated takeoff is selected from the N1 limit page.
The main reason to use derated takeoff thrust is to save on engine wear and maintenance cost over time. The airline I work for use the "Derate" method first and then assumed temperature over it if additional performance buffer allows for it.
I would concur with the OP that this system behavior in 1.0.5 is just a tiny bit off the real airplane, which is good as we sometime need to be reminded that this is not the real thing!
I can post a video if evidence is needed. To my knowledge, this is not an option, does not need to be enabled by pin programming and is common to all FMC software including 10.8A.