The problem is that the MSP scheduler cannot open any projects launched from PPM. Also, when they try to open a project from the MSP ribbon by pushing the "open" button, the login prompt appears, but the "setup" button is greyed out and inaccessible. The affected end-user has all of the appropriate rights to open projects defined in the manual. This is an SSO-enabled environment using a client-side proxy server; the customer needs access to the setup dialog to add the proxy server host name.
Instead of trying to launch the project from PPM in MSP, open MSP directly on the workstation, navigate to the PPM Integration ribbon, and push the "Open" button. Now you will see the "Setup" button is accessible.