No, it doesn't work. The last screenshot was taken after selecting "8.5" from the dropdown menu.
I have 7.1, 8.0, and 8.2 working fine in the VIPM, and they each show up with the appropriate version numbers in the drop down menu with the options set in the second screenshot.
It's almost like the VIPM registers the LV8.5 LabVIEW.exe, but can't extract the version number correctly to show the packages available (if there are any available on the server yet for 8.5).
To clarify a little more, the first screenshot (port test result dialog) was taken immediately after selecting "Test" in the "Edit Port" configuration dialog. After clicking the "Test" button, the LabVIEW 8.5 dev environment starts like it should, so I know it is able to communicate (the TCP settings are correct). The message on the port test results dialog is interesting though... since it is a success message but wrongly reports that no version is selected.