I tried that, but since it is an SFP only port, it doesn't allow that command.

Did anyone manage to find a solution to this?

looking at the docs you need to be on a specific or higher ios-xe version for LH sfps

http://www.cisco.com/c/en/us/products/routers/4000-series-integrated-services-routers-isr/relevant-interfaces-and-modules.html

I'm using GLC-SX-MM - not an LH SFP. 

I'm using the latest recommended MD release - isr4400-universalk9.03.16.04b.S.155-3.S4b-ext.SPA.bin.

Oh ok miss read that thought was same,  it says its supported and the D version is supported so must be a bug of some sort , I have GLC-Ts working in those ports fine too in 4331

does it show up in inventory at all and do you see it in the output of the show interface at all ? , whats the version of the SFP you have sometimes that can be the issue caught me out before , a newer version worked fine but older version didn't even though they were both same part glc-sx-mm

I might order a new one and give that a try - my gbic has never been used before, but it is 6 years old.

I don't have a spare 4331 onsite there all remote but I have ASRs running IOS-XE i put an SX in a spare port on an ASR and its showing up , the version is 30-1301-02 , the older versions I have is 30-1301-01

does your sfp even show up in inventory or in the interface itself like below ?

xxxxxxxxxsh ver | i 3.16
Cisco IOS XE Software, Version 03.16.03.S - Extended Support Release
System image file is "bootflash:asr1001x-universalk9.03.16.03.S.155-3.S3-ext.SPA.bin"
xxxxxxxxxxx#sh invent
xxxxxxxxxxx#sh inventory | i SX
NAME: "subslot 0/0 transceiver 3", DESCR: "GE SX"
xxxxxxxxxxx#sh int g0/0/1 | i SX
  Full Duplex, 1000Mbps, link type is auto, media type is SX

It's not showing up in the inventory. 

The Fiber cable is currently disconnected.  When I attach the Fiber, the Interface turns-up but cannot forward packets, and I receive the %TRANSCEIVER-3-NOT_COMPATIBLE message.

whats the version number on the back of the sfp is it 01 or 02 ?

you should need to be connected to see it in inventory

I would try another ios version before buying another sfp as I see bugs for certain versions that have no workaround with transceiver not compatible, they juts say upgrade or in your case if your at the latest downgrade to another MD  

Error Message     

%TRANSCEIVER-3-NOT_COMPATIBLE : Detected for transceiver module in %s, module disabled

Explanation    The transceiver module for the interface specified in the error message is not compatible with the interface. As a result of the error, the module is disabled.

Recommended Action    Replace the module with a compatible transceiver. If the problem persists, Copy the message exactly as it appears on the console or in the system log. Research and attempt to resolve the issue using the tools and utilities provided at http://www.cisco.com/cisco/web/support/index.html. With some messages, these tools and utilities will supply clarifying information. Also perform a search of the Bug Toolkit http://www.cisco.com/pcgi-bin/Support/Bugtool/home.pl. If you still require assistance, open a case with the Technical Assistance Center via the Internet http://tools.cisco.com/ServiceRequestTool/create/, or contact your Cisco technical support representative and provide the representative with the gathered information

I'll try experimenting with some different firmware levels.

Thanks for your help.

I managed to get hold of another Cisco 4431 Router, and as a test I connected it back-to-back with a Cisco 3750 switch, using a spare GLC-SX-MM that I have, and a spare OM3 Multi-Mode Fiber cable.

Also, I upgraded the Router firmware to the same version as my other Router that has the problem, and I made sure that my configuration was the same.

It started working immediately, proving that...

1. GLC-SX-MM is a good part number for these Routers - my test GBIC was even from the same batch as the one I have the problem with;
2. the IOS version is good, and
3. my configuration is good.

So now I am very confused. This appears to suggest that the GBIC I used on my other Router is faulty, yet I put that same GBIC back into a Cisco 3845 and it works fine.

Any ideas?

Im starting to think there's something up with the port on the original 4331 or the router itself  if its working fine on another 4331  same gbic and ios version, did you try any other ports in the original router did you get the same issue