Why won't Live Paint work for me?

Synopsis: Illustrator won't let me use Live Paint, or rather, Live Paint won't let me use it. I tested it out on a random file by creating shapes with some of the tools and it worked fine. However, with any image I try to use, it won't work. This is what it says anytime I try to select the area and color in. 

It also doesn't allow me to use Image Tracing. I don't know if the two are connected or not, but I find it strange.

I'm going to explain all the steps I went through from start to finish to create the image.

First, I took the picture using a digital camera (naturally.) Then I uploaded the pictures to iPhoto. I can't remember if I edited it or not, but if I did, it was mostly cropping. I then placed the picture on my desktop and took it to Photoshop. There I put it to grayscale and messed with the levels to give some contrast. I then saved it as JPEG. After that I put it in Illustrator and I started tracing it. The blue in the picture was traced in Layer 1, while the red was in Layer 2. (I thought that maybe had something to do with it, but I highlighted just the red and had the same problem as before.)

So yeah, I'm at a standstill...can't get anything done at this point. It's CS6 for Mac. It's possible I screwed with something without even realizing it (I am new to this), but if I did...what did I do? And can I fix it?