You will notice that the greyed out option in your picture is for EBS backed instances, while your instance has an instance-store (i.e. S3-backed) root volume.
In order to clone this instance, you have two options.
Option 1: If you wish for your (new) instance to also be instance-store, you can create an AMI of the existing instance and launch a new instance from that. It will be identical to your current instance (but only the root volume - if you have data on the other ephemeral disks, you will need to deal with that separately). For this approach:
ec2-bundle-vol -d /mnt -k $EC2_PRIVATE_KEY -c $EC2_CERT -u USERID -s SIZE
ec2-upload-bundle -b BUCKETNAME -m MANIFESTFILE -a ACCESSKEY -s SECRETKEY
(If you are running something such as bind, you will want to stop it before bundling - in fact, it is best to stop whatever services you can in order to get a consistent image - depending on the utilization of your server, you may also consider freezing the filesystem)
Option 2: Copy the root filesystem to an EBS volume, and then create an AMI from that.
Attach an EBS volume that will hold the data of your root volume
Mount your EBS volume, and copy the data using:
rsync -aHAXxSP /source /target
Launch an instance based on your new EBS volume (you will need to explicitly specify any ephemeral storage (i.e. block mappings) you want your instance to include at launch time or when you create the AMI).