Recently I encountered this strange error with iTunes and my iPod touch: I downloaded some applications from appStore and went to iTunes->Devices->"myipod" and chose "Apps" from the top bar, the application editor that opened was grayed out.
I was able to sync photos and videos correctly, but unable to install or manage the applications.
1. I disabled restrictions completely from my iPod
2. Closed iTunes
3. Reconnected the iPod to my laptop
Really, I had to remove everything from iPods restrictions, not just only "installs".