Ok, I know it's been a few months, but I'm putting this here in case anyone else has this problem and is googling for the answer.
I had this same issue. The problem turned out to be that the photo I was trying to place was Live. Live photos are basically very short videos, and are larger files than normal still photos. Either Illustrator can't place a video, or the file is too large.
The solution was to go to the photo in the photo app on the iPad and create a duplicate. When you create the duplicate, it will ask if you want it as a still photo. Say yes. Now you have a true photo file that is much smaller in size. Go back to Illustrator and place the duplicate still photo.
Laura
Ok, I know it's been a few months, but I'm putting this here in case anyone else has this problem and is googling for the answer.
I had this same issue. The problem turned out to be that the photo I was trying to place was Live. Live photos are basically very short videos, and are larger files than normal still photos. Either Illustrator can't place a video, or the file is too large.
The solution was to go to the photo in the photo app on the iPad and create a duplicate. When you create the duplicate, it will ask if you want it as a still photo. Say yes. Now you have a true photo file that is much smaller in size. Go back to Illustrator and place the duplicate still photo.