If it is grayed out that means it is already your system library.
In Photos preferences, the box that says "Copy items to the Photos library" should also be checked. I assume that it is checked since the photos are showing up in your Photos app library.
For some reason your Mac is not recognizing the link to the Photos app library. It is not confined just to iMovie because, as you have mentioned, the screen saver app cannot access the Photos app library either.
You could try booting up in Safe Mode (see Help menu for instructions) and see if your screen saver will recognize Photos. iMovie won't open in Safe Mode, so you can't test there. If screen save recognizes Photos in Safe Mode, then perhaps there is some conflict that is obstructing the link in normal mode.
It wouldn't hurt to try opening iMovie in a new user account, such as the Guest account on your Mac, to rule out any conflict with your normal user account.
Also, you could try running a First Aid scan from the Disk Utility app on your computer.
-- Rich