So I had Dak'kon copy the identify spell and it is in his active spells list, but when I try and have him identify something in inventory the option to use spell remains grayed out? Am I missing something?

You must first rest. Resting memorizes the spells, and every time you cast a spell you'll have to rememorize it by resting. Therefore if you want to cast a spell twice you'd have to go into your spellbook and tell him to memorize it twice. So if you want to identify 2 things, place 2 identify spells in Dakkon's spell slots to be memorized, then rest, and now you can cast the identify spell twice.

You have to manage your spell slots carefully. You only have so many slots based on your INT and level. If you only have 5 slots and 2 of which are identify, you'll only have 3 more spells of those 1st level spells you can cast in other situations such as combat.

You can also identify things without the spell if your Lore skill is high enough, there's potions and charms you can get to boost it temporarily

Also remember, armour prevents the casting of spells.

Is there Dakkon armor in the game that stops him from casting?

I didn't think he got armour at all. I thought it was only Grace & Annah who had changeable armour

Armor does not prevent characters from casting arcane spells in Planescape, But to my knowledge Dakkon is the only mage who can wear armor. (His starting equipment)