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Having the exact same issue here. Have checked all the boxes, granted all the permission, still grayed out. What the devil am I missing?
My consultant took a look and got it working. Here is his reply just in case it is useful to anybody
"You didn't miss anything - I manually checked each related setting at the tenant level, site collection level and site level - everything was configured as it should have been.
I ultimately reapplied the site level sharing policy settings through PowerShell and that appears to have corrected whatever was awry on the back end.
Sometimes just pulling the batteries out and rebooting is all it takes! I wish it was a more profound solution..."
Great news! The new Admin management tool (now in Preview mode) allows you to select the specific site (under Site Management by clicking on the site name) and then click the "Change" link next to the "Sharing Status" and change this setting. So, you don't need to use PowerShell.
