A Microsoft file hosting and synchronization service.
Hi Eric,
Given the screenshot, if devices mentioned above are in your office, the "greyed out issue" may be related to Group Policy settings in your tenant. You may contact your IT, let him check the Coauthoring and in-app sharing for Office files section in this article. If the setting is disabled, he can choose to enable it via Group Policy according to your company's policy.
For the notification about another user, based on my test with the Office suite from Office 365 subscription (in my test it's Office 365 ProPlus), when two users open the same file in their synced folders. They could get the notification for each other is editing the document. We can see the requirements for real-time co-authoring, we need to use the Office suite from Office 365 Subscription. The Office suite in your tenant is one-time purchased MSI installation. To learn more, see Collaborate on Word documents with real-time co-authoring. Thanks for your understanding.
Regards,
Tim