This option is greyed out because security administration is done on the web server. You need to enable manual security administration. If you have the server extensions installed, then you should find under the web properties, a FrontPage tab. Uncheck the box, "don't inherit sercurity settings" then check the box "Manual administraton". Make sure "Authoring" is enabled. I'm assuming you have IIS? I might not have some of the wording correct, but it will get you there. Do you have Front page installed on the web server? If you do, open Front page and go to the security option and see if it is available.<br>
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Let me know if this helps, if not then I have some other ideas.<br>
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Tool