Another reason for moving this button outside this notification menu is also the context: the notification menu is something placed outside of the page so it’s not easy for users to understand that it will contain a configuration specific to the current page. Putting the notification configuration settings inside the page makes that more clear.
There’s also a minor question of consistency: we took a bit of inspiration from the Export modal behaviour when proposing this originally since the same question occurred when Export was revamping about using a dropdown in the more action menu, or using a modal, and it was decided back then to use a modal (see: Export format selection)
It’s not exactly the same thing here, but it shows we have a precedent with using modal for this kind of complex actions.