Files were opening as read-only even when choosing "Edit in" whatever app.
After trying everything I removed "Office 2003 Add-in: Web Parts and Components".
Now everything works as it should.
Click on the link - read only.
Click on drop down and choose edit - not read only.
I don't know...
Add your site to the Trusted Sites zone in Internet Explorer. This will eliminate multiple logon prompts and you don't have to disable other features like the solutions offered above.
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