Running the latest update of VMWARE Workstation 16.2.1 and have a VM configured with Windows 11 Enterprise. I have the image encrypted and virtual TPM enabled. I have USB mode set to 3.1 and have also tried 2.0. All removable USB devices are showing greyed out and can not be attached to the guest. I found this article where someone else was having a similar issue however this particular setting is not accessible in the VMX file once the guest has been encrypted. I tried toggling this manually in the VMX file prior to encrypting the guest, but same issue.
https://communities.vmware.com/t5/VMware-Workstation-Player/All-USB-devices-are-greyed-out/m-p/28781...
Verified the USB Arbitrator is working (didn't have this issue previously on this host, but VMware Workstation was already previously updated so not sure when this got introduced). Have re-built the VM several times now, same issue. Latest VMware tools are installed.