When I generate my design, I notice that the multiplier blocks are setting "use_LUTs" during core generation even though "use embedded multipliers" is specified in the System Generator GUI.
This is due to a known issue in System Generator. This issue seems to only affect devices which have 18x18 dedicated multiplier slices, but not DSP48 slices.
To work around this issue, check the box for "Use behavioral HDL" on the Implementation tab; this produces code which will be inferred to use the embedded multiplier blocks by the synthesis tool.
This issue is fixed in System Generator for DSP 11.4.