When aligning to reference the sequences are not aligned to each other, each of them is instead aligned to the reference sequence independently and the pairwise alignments are combined into a contig. However, an iterative fine tuning step can be enabled, which makes reads that overlap from the initial assembly stage align better to each other. Fine tuning causes reads to align better to each other around indels which improves the accuracy of consensus and variant calling. For more information, click the help (question mark) button next to the fine tuning options in the Map to Reference setup dialog.
If you just wish to use a reference sequence to help construction of the contig where the reads extend beyond the length of the reference then you have two options. With iterative fine tuning, reads can extend a bit further past the ends of the reference sequence on each iteration so make sure you set the number of iterations high enough. Or you could select all sequences including the reference and use the De Novo assembler.