Hi Jamal,
I know this is a bit old, but thought I'd post it here anyway as I'm dealing with it atm. Looks like the answer might be here: https://moodle.org/mod/forum/discuss.php?d=390401#p1619160
I know this is a bit old, but thought I'd post it here anyway as I'm dealing with it atm. Looks like the answer might be here: https://moodle.org/mod/forum/discuss.php?d=390401#p1619160
Basically, it looks like your step 2 & 3 needs to be swapped - i.e. set the restrictions first (save), and then enable emailing students.
Haven't tested, but that's what I'm gathering from that discussion.
Thanks,
Zander
Zander