I was trying out TSW2 on my mates new Xbox Series X and found that whilst navigating around the menus before actual game play, the minute you hit red X to go back to the previous menu you no longer have the option to select anything. The only way to get round this is to quit the game and restart.
if you click x then it will pop up with configure overlays but you should be able to get out of this by hitting the B button.