I am also having the same issue as OP.
For a Cluster Bar chart, the Custom Labels funtionality is not working in oct 14, 2023 update. Version # 2.122.746.0.
Its greyed out and toggling the button on/off does not do anything.
Re-creating a brand new visual (Cluster Bar chart) and toggling the Custom label button to "On" does not allow to add new custom labels as it did in the previous verisons.
Checked the known bugs page but nothing specifically for a Cluster Bar chart. Very confusing.
If anyone has any ideas, would appreciate some guidance on how to fix.
For an existing visual when PBI desktop was updated to version # 2.122.746.0
I cannot even remove the measure in the custom label box for an existing visual. Just greyed out and disabled.
For a brand new visual created from scratch