Custom Items and Inventory can appear enabled while actually being disabled

Toggling the Custom Items and Inventory setting and then closing the editor without saving can lead to a mismatch between the Project Settings Custom Items feature and the IslandSettings object in the world that governs behaviour in-game which leads to missing functionality. The project setting will look checked but Island Settings → Game Data → Use Custom Inventories will be unchecked without the ability to manually activate it.

WORKAROUND:

Unchecking and rechecking the Custom Items and Inventory setting will re-apply the change to the currently loaded Island Settings object. Be sure to save!

1. Create new blank island template.
2. Place the shotgun_template, pistol_template, assault_rifle_template, and {{submachine_gun_template }}entities in the world, and save.
3. Go into Project Settings -> Beta Access and check 'Custom Items and Inventory'.
4. Close the editor without saving.
5. Reopen the editor and load your saved island.
6. Check Project Settings -> Beta Access. 'Custom Items and Inventory' should still be visually marked as active.
7. Load into PIE and enter Game Mode.
8. Walk up to any of the weapons. The interaction prompt will appear, but pressing the interaction button will do nothing.