I tripped over this post because somebody said you need a different USB driver for AVRISPmkII to work from Arduino IDE for burning bootloaders.
I think what the OP is saying here is that Arduino can't use the AVRISPmkII to burn bootloaders, like it should, as it's offered in that menu, and if you do magic on usb drivers it might.
I'm going to ask, can't I just grab the bootloader file from the Arduino directory structure and blast it into a virgin chip using the native programming environment called AVR Studio 4? (Forget about trying to do it from Arduino IDE if it can't handle it, as it seems it can't).
And the answer is yes: http://www.arduino.cc/playground/Learning/Burn168
Not every nail needs a hammer, but it seems my problem is solved.
FWIW, I think the whole bootloader thing for Arduino is getting a little old. It's just as easy to skip that design concept and just have a little wee programmer buried in the Arduino IDE that zaps straight code into the little darlings.