A family of Microsoft word processing software products for creating web, email, and print documents.
I chatted with MS support and found a solution that solved this problem for me.
The issue is caused by the file picker filter (a button labelled "Show Options") at the bottom of the file picker screen being set to an incorrect option after the recent Word update. In my case, it was set to “Templates,” which causes all standard Word documents to appear greyed out and unselectable. To resolve this, go to Tools → Compare Documents, click to browse for a file, then click "Show Options", and change the “Enable” dropdown at the bottom from “Templates” to “All Readable Documents” or “Word Documents.” Once adjusted, your documents should become selectable again.