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After adding the ArcPad Data Manager toolbar to ArcMap, the buttons are grayed out.
The toolbar needs to be activated prior to use.
Activation of the Data manager toolbar is the same as activating an extension.
Navigate to Customize > Extensions and check the box next to ArcPad Data Manager.
ArcGIS 9.3.1 and earlier:
Navigate to Tools > Extensions and check the box next to ArcPad Data Manager.
This needs to be done in both ArcMap and ArcCatalog.