I don't know if it's an Ultima issue, I have a legit copy and the same thing happened to me a while back, couldn't switch out any materia, weapons, access the items ('item' was grayed out), or change limit levels (limit was also grayed out). I asked Gjoerulv about it thinking it might have been an issue with the hardcore mod (Tetsujin I don't know if you're using it), my first thought was something was up with the kernel bin, but older saves worked just fine. I asked around and nobody seemed to have a fix, hopefully you have some better luck, but in my case, I didn't find an answer and just had to use an older save and lose a couple of hours in the game. Hopefully you get an answer, but if not I hope that's not your only save.