OK I'm sure I'm just being dumb here. But why can I not apply this credit memo against an Paid in Full Invoice?

Credit Memo can be applied to only open invoices Standard behavior of netsuite

Thanks! Whats the procedure for applying credits to fully paid invoices ?

Not possible in standard function , alternative way is to delete the payment record . then edit the credit memo apply the invoice

"Applying a credit to an invoice" means to use it as payment. How do you envision this working on an invoice that has already been fully paid?