Photo folder greyed out and unable to Sync through iTunes to my iPhone

In summary: When in itunes and syncing a device (iPads/iPhones), under the Photos option, when i 'select folder', 'external hard drive' the Photo library stored here is greyed out and i can't choose it.. so can't get my photos in Photo to be viewable on my iPhone, your tips would be great thanks!

Background - I take photos on a number of devices/cameras then I import them using the Photo App, previously I used iPhoto, to sort them into albums etc. I then would sync my iPhone with iTunes, under Photos I would then click sync photos and choose which of the folders I'd like to be able to view on my phone. My entire Photo (and iPhoto Library) is stored on an external seagate drive. iTunes previously had no problems allowing me to select the folder on this external drive and could view those selected photos on my iphone/ipad etc.

I've udpated my iMac (only a month old) and iPhone (6 plus) with all the latest updates and both are running the Photos app.

Now I've clicked to sync Photos with my iphone and there are no folders/photos to sync - it says 0. When I click the drop down (which currently shows Photo App and 'select folder', I choose my external drive which then shows everything on the drive but its all greyed out and I can't click either the Photo or iPhoto library, Previuosly i have always been able to sync using this external drive, this issue has just occured post moving to Photo instead of iPhoto.

When I open the Photos app I have no problems viewing all my photos/albums etc - all working perfectly. Also my time machine backups are backing up my imac HD and external drive with no worries.

iTunes is syncing my music with match perfectly to my iPhone same with books apps etc.

I've switched everything off - iMac and iPhone and back on. i've unticked the sync Photos option, completed a sync removing all of the iphoto library that was on my phone. I've clicked sync again but there are no photos to sync - I just can't get to the folder - Photo library from the external drive is grey and I can't choose it. My iphone is showing my camera roll, photo stream from the cloud, instagram uploaded photos and recently deleted photos but nothing further. I've also tried this with my iPad with the same result.

Any advice to be able to get the Photo library on the external drive from being greyed out when in itunes syncing a device would be great thanks!