What is the importance of MAX II CPLD in the Cyclone III FPGA development board?

You don't say which Cyclone III dev kit it is. However, as Galfonz states - it's probably part of the on-board USB-Blaster circuitry. If so, it shouldn't appear in the JTAG chain when you scan it.

However, if it does appear in the JTAG chain when you scan that it's more likely to be a 'system controller' and, as you suggest, may be used to select which image to boot the FPGA from. An example of this can be found on the cyclone iii ls fpga development kit (https://www.altera.com/products/boards_and_kits/dev-kits/altera/kit-cyc3-ls.html) and other, generally newer kits.

Cheers,

Alex