The box to "Show MapTips using the display expression" is greyed out for my query layer. I would like to get it to work.
The ArcGIS 10.1 query layer is pulling point geometries from SQL Server Express 2012. A spatial index is created on the SQL server side and ArcGIS appears to have created it's own spatial index. This was confirmed and even updated ('Update Extent') from the layer properties -> source tab. The ESRI resource page indicates that as long as a spatial index (ArcGIS side) is available it should work.
Here are the best articles on the subject I could find: