Do you have to set it to lvl 3 first before they let you use the item? If it still doesn't work, try that. It shouldn't make any difference anyway, as there is nothing you need to do to switch limits except tell it to, and your limit gauge is going to be reset anyway once you set it to 4.

I have seen everybody's lvl 4 limit breaks, if they exist. Including Aeris. Last time I played before my current game (that stopped at Junon Underwater Reactor b/c I got FFC and FFXI for Christmas), I was also all ready to learn their lvl 4s as soon as I got the item, including Red and Aeris, and I once had Omnislash beat Jenova Life in one shot.

Thankfully, your problem is Lunatic High. It takes longer to go to another level.