Use existing notification as report email
Did you try manually typing the ID from the Notification Templates screen in the MailSettings -> TemplateID field? Something like this:
Just be careful if you try to combine options from the MailSettings section in Report Designer with the options on the Notification Templates screen. It's been a while since I looked at it, but, if I remember correctly, it gets complicated, especially when things like the Mailing Settings tab of the Customers screen gets involved.