Dan, thanks so much for responding. As far as I can tell my labels are turned on. I've right click onto my feature an turned the labels on that way....also clicked onto the labels icon in the upper left to turn them on as well and still the label placement is grayed out.
Pete, there are too many options to sift through, you will have to elaborate on where the process breaks down. I assume that you have a featureclass layer which can be labelled, but the point where the options gets activates suggests that something simple hasn't been done
two access points
1 right-click on a layer and select 'Label' , the labels appear and the toolbar options appear
2 right-click on a layer and select 'Label properties' the following dialog appears as well
Apparently it's a bug that has the label placement disabled. The issue has officially been reported, but have no idea on the timeline as to when it'll be fixed. Until we hear otherwise, we're out of luck on this one....
Well, in the meantime, you can use a featureclass in the 2D section with symbology. You can copy/paste this featureclass in the 3D section with a label and no symbology. You will not have the choice of label, bit at least it will be some label...