If you are using the street network (SDC) from ESRI, you do not have to create a network dataset from it. It is ready to use with Network Analyst. Simply bring up the Add dialog, browse to the location of the SDC data folder and add the "streets" network to ArcMap. You should be able to route on it.
As far as why the create network dataset is grayed out, make sure that in ArcCatalog (and also later in ArcMap), click on the Tools menu and choose Extensions and make sure the Network Analyst is checked on.