This field type has multi-level permission. E.g. parent field can be read-only but the child form is editable (or vice versa). Here's the expected behavior when this option is enabled for linked records fields:
Only the field in the parent form becomes read-only.
The child form in the linked table can still be editable (if the option is enabled).
How to allow expanding records, but not make them editable?
Follow this article for step-by-step instructions.