Huh. Not certain why it wouldn't let you switch, although some of it could be due to the amount of time it takes to process the file (it's pretty big) which could cause some loading time issues.
As regards the permissions issue, yeah, a lot of people are up in arms over that, but I've yet to find someone who's found a solution that works for everyone. I've raised the issue in the main Hero Lab forum and there's a possible workaround
here to set a different directory for your Game Data. Unfortunately, there's no way to tell it "look here and here", so you have to move it all to one directory.