1. No need to add additional CD-ROM drives. And if you do, there is no reason to have them point to physical devices - select the "use image file" option.
2. If the Tools are already installed, then the menu should change to "Reinstall VMware Tools". If the VM is powered off or suspended, it will say "Install VMware Tools" but be greyed out (must be powered on in order to install them).
3. If the guestOS setting is not set properly as Wila said above, the system may not recognize what the guest is, and therefore not be able to select the appropriate ISO image file for the Tools installation, and therefore keep the menu greyed out.