*UPDATE 23-Jul-2012* KB solution provided by Microsoft
We were experiencing some issues while using the Datasheet view in SharePoint 2007 and SharePoint 2010 on some clients. When we uploaded some documents using "Upload Multiple Documents". This checked the documents out to the user who uploaded the documents. This is normal behavior. However, when you use the Datasheet view to edit some metadata for the uploaded documents, it would say the cells are read only.
I am logged in as the person that has uploaded the 2 text files.
We had some issues with using Datasheet view earlier, so I decided to check the help file. This is what it says:
After making sure these were not the issue in our environment, I started looking for other possible causes.
After a lot of testing, I found out this is caused by the installation of Office 2007 Service Pack 3.
When we were testing, I posted a question on the forums asking explaining the situation, hoping someone would know why this happened.
There is now a solution provided by Microsoft.
The steps I took to solve this issue were:
1. Download fix from: http://support.microsoft.com/kb/2598128
2. Save and install on machine that has Office SP3.
3. Restart computer.
4. Run Fix it on machine that has Office SP3.
5. Restart computer.
7. Check Registry for new entry. The following entry exists: (HKLM\SOFTWARE\Microsoft\Office\12.0\List\EnableCheckoutEdit) with value 0.
Normally, you cannot undo a Service Pack installation for Office. But since Service Pack 2 for Office 2007, Microsoft released a "Service Pack Uninstall tool". More information about this tool can be found here, or you can download the tool here.
For uninstalling Service Pack 3, I ran the following command: oarpman /report. This generated a report where I could find the "Release code".
Next I ran oarpman /remove O12SP3 /log C:\logfolder\SPuninstall.log.
After this finished running (took approximately 15 minutes on my slow VM), I rebooted the VM and checked the Service Pack level for Office 2007. It now is Office 2007 Service Pack 2.
After this I tested the Datasheet view again, and everything worked!