Found the answer myself!
Refresh the iCal plist file:
The com.apple.iCal.plist file is in your Macintosh HD/Users/yourusername/Library/Preferences Folder.
To get to the Library folder use Finder > Go (while depressing the "Option" key) > and select LIbrary.
Drag the iCal.plist file to your Desktop.
Then log out/in or restart iCal.
Now go back to iCal preferences and they have been refreshed - the birthday check box is now available.