Line option is changed by going in to options under Text Editor (Which I think is under one of the major categories) Then go to C++ files then there should be a tick box.
It looks as if you are missing SDL.h. As Amal_isa said, check your powder.c file and make sure "SDL/SDL.h" is changed to "SDL.h".
If you've done that, make sure you've downloaded the "needed libraries" zip and placed the two folders (SDL and BZlib) into the same folder where powder.c is.
Also make sure you have added the dependencies (step 9 and 10 on the editor setup section on the wiki) and the additional include folders (step 11).
To clarify, the dependencies and includes sections should look similar to the following (your path to your powder toy source files will be different and as I am using Visual C++ 2008, the boxes may look a little different):
Where SDL.h is depends on where you installed the SDL header files. It is suggested to install them to a subfolder called SDL because that is how it is on other platforms.