Set the "Allow RAW files to be modified" checkbox
Set the "Add embedded metadata:" checkbox (and then choose what types of metadata you want to embed)
Uncheck the "Always create and/or update XMP sidecar file" checkbox.
As for the types of embedded metadata, at this point in time you only need XMP. IPTC is obsolete but is available for users who work with older software that needs it.
Beware though, that some software does not respond well to embedded metadata and may claim that your files are damaged. XMP sidecar files are the "industry standard".
DNG files are an option if you're willing to convert your RAW files to DNG and they always use embedded XMP and XMP sidecar files are not created when adding/editing metadata on them.
HTH,
-Kirk