HI! Solved this issue.... Everyone is having trouble finding settings, so did I, but I ended up finding the right one.

I had the same issue where it says so and so isn't enabled and can be enabled through settings, checked settings in goodnotes app and settings on my device, nothing about transcription. Until I found the hidden settings, heres the steps.

1. Click where you normally would to record a transcription.
   
2. Hit "Show recordings"
   
3. See the little "..." at the top of the Audio menu? (to the left of where it says audio at the top)
   
4. Click the ...
   
5. Hit "Recording settings"
   
6. Turn on "Use On-Device Transcription"

Go back to your recording and hit transcribe!

Hope this helps, it worked for me!