Textures have to have at least one pixel of colour on them.
milkyshake: Follow the Image/Mode tabs and set the image to RGB. If the texture is greyscale, it won't work at all (even if complete non-colour was supported).
"Call yourself alive? I promise you you'll be deafened by dust falling on the furniture,
you'll feel your eyebrows turning to two gashes, and your shoulder blades will ache for want of wings."