How to have display suite extra show up as layout options when creating blocks? What I do now is create a content item.

Choose a layout.

Create content.

Use Node as Block to show as a block.


Would it be possible to have display suite extra show up for layouts when creating a block? So the block can have layouts?
May I suggest a different setup?

I would go for DS + Bean, that would allow you full Display Suite capabilities in your Drupal.
It will effectively give you block types that you can manage like nodes (Fieldable as well as managing their Display View Modes using DS).
Plus, the world of BEAN is wonderful => https://www.drupal.org/node/1475632
And it made it into core in D8 for a reason!

Here is two quick screenshots (after 30 seconds of clicking):



Manage display for a block type





Add a new block (using a new Block Type called Standard) via Content>>Add Block>>Standard.



Hope this helped, even though it deviated from the OP a tiny bit!