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Check that your user role has full permissions for both the custom table and the "Connection Reference" table. Missing permissions can make the field read-only.
Make sure the field on the form isn’t set as read-only in the form settings of the model-driven app.
Confirm that the lookup field is properly set up in your custom table as a "Lookup" type, not a calculated or composite field.
Test the form in another app or environment to see if the issue is specific to this app.
If the issue is still there, it could be a system restriction on the "Connection Reference" table. You can create a custom table with the data you need from the "Connection Reference" table and use that table for the lookup instead.
If none of this works, contact Microsoft support to confirm if there are any system limitations or get further guidance.
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