Can anyone suggest why I cannot insert a drop-cap in the attached file?

In the attached file, and an  old file, with \usepackage{letterine} in the
preamble and the "initials" module loaded the Insert commands appear but
faded out if I have the cursor in a paragraph with a drop-cap.

If I start a new paragraph the insert commands disappear from the Insert
list.

However, both compile nicely.

In the minimum example I simply copied a drop-cap from my old file,
probably produced with LyX 2.2.0 or 2.2.1

I am probably missing something basic but I don't have a clue where to look.

Thanks

-- 
John Kane
Kingston ON Canada

Attachment: fancy1.lyx
Description: application/lyx

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