Here is how I understand it:
Try to push N1 before you push TO/GA and nothing happens – it is not compatible.
Push TO/GO and N1 will display of FMA and the N1 switch illuminates.
If you push N1 after TO/GA but before 80 kts you will get FMA ARM (you should not do this).
After 80 kts you will get THR HLD (just as with TO/GA) and the light in the N1 MCP panel button extinguishes and you are stuck with this until you get ARM during climbout.
The difference between FMA ARM and THR HOLD is ARM’s underspeed protection which we don’t want in case of an abort – hence the THR HLD mode.
Sorry NSEU - but I have a feeling that I did not talk about what you asked. In which manual did you find the text "When the DFCS is not engaged, the pilot can push the N1 selector switch on the MCP to manually select the N1 mode." ? Are you talking about the N1 SET knob on the center forward panel which can be used to manually set the N1 limit on the thrust mode display (which has no effect on the autothrottle operation)?