Cant Modify or Resize Amazon EBS Volume

Update: the answer below was correct when written, but was subsequently superceded by this announcement on June 28, 2018:

Starting today, Elastic Volumes extends support to Amazon Elastic Block Store (EBS) magnetic (standard) volume type. You can now dynamically increase capacity or change the type of magnetic (standard) volumes with no downtime or performance impact using a simple API call or a few console clicks.

The issue that originally triggered this question should no longer occur.

In the screen shot, the volume type shows standard.

That's a previous generation magnetic volume.

The previous generation Magnetic volume type is not supported by the volume modification methods [...]

Those can't be resized, so the option is grayed out. Your new instance from the AMI probably has a gp2 SSD volume, which does support resize.

Stop the instance that the EBS volume is attached to. Then the modify option should be available for use.

If that doesn't work then try detaching the volume.