Carve region is really meant for creating surfaces to inset or provide a background for a pattern. So for that reason, the "carve region" uses the carving bit and rasters the pattern in.
For a mortise, this is probably not what you want due to the taper of the carving bit. You would probably be better off using a straight bit (the 3/8" straight bit is recommended, but the cutting bit would probably work for you) and applying it to a rectangle. You may need to add additional carving inside the rectangle to clear the whole area out. There was another thread on this a while back, and we are planning a mortising feature to help automate this.
Chris Morlier
CarveWright