The encoding is carried out by the camera, so the reason it'll be greyed out is that the mile sight mini PTZ does not support H265+ (I believe H265+ is a proprietary Hikvision compression standard). That model NVR will definitely support H265+ but I wouldn't recommend it. Although you'll get a disk space saving, it doesn't perform as well as H264 or H265. You'd be better off just installing a larger hard disk if it's the space that's an issue.