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