I was about to create a new post asking for help on the Analyze Volume tool for setting the boundary when instead I found this post already covering it. Chris Key gave the answer, which is to use a 2D model for this tool, and for many other tools that may have the response "Element Not Valid for this Tool". Like Michael Gilham expressed in his comment, I also feel that this should not be an issue when using this tool. It should simply read northing and easting and ignore Z in the same way it would ignore Z in the 2D model.
And as with most tools that might trigger this response in a 3D model, even if this requirement is maintained--if this tool never does get fixed to work in a 3D model--the response should be more informative like "This is a 2D-only tool", in the same way that other tools have required a 3D model reported that.
Also, whatever documentation exists should include the warning that it is a 2D-only tool. It shouldn't wait until the user has gone through several steps and then say "NOPE!"
We understand that there are bugs in any piece of software, but where there are bugs, the developer should include some sort of code or some sort of descriptive message saying "We know what you're trying to do, but you have to do it this other way instead." Not something as uninformative as "These are not the droids you're looking for."