It turned out that the Self-Service Site Management has to be turned on for the web application that this site collection sites on. It makes sense but it's just one of the many gotchas of SharePoint.
To turn on Self-Service Site Management, go to Central Admin -> Application Management -> Self-Service Site Management (under Application Security), and check On and Save. Then go back to the Site Directory Settings page of the site collection. The checkbox is enabled now.
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