Sorry I didn't get to this sooner.
The placed image file Gnarly4.png is the source of the problem. It's no longer a valid PNG file, so when doing the link update Muse is tripping up on it and ending up in this menus disabled state. We'll work on fixing the link update error handling code to prevent this for a future release.
In the meantime I wrote a snippet of code to extract the image data for the image from the .muse file to recreate a valid PNG file. I'll send you a Gnarly4.png that works.
It appears the Gnarly4.png file you sent was truncated or overwritten by something else. It's not a valid PNG and is only 123K whereas the recreated original PNG is 2.3 MB.
/avatar/30.png?a=13354){kind=small}