Cannot finish retouch, generative fill, something about rasterizing

@larry45 after using the Lasso tool, sometimes if you have a tiny, nearly invisible selection remains active could be the caus of it. If you have an active selection elsewhere on the screen, your brush won't work outside of it. Press Ctrl D (Windows) or Cmd D (Mac) to deselect everything. Or click once within the image to deselect as well. 

With regards to Smart Objcts, yes, you can work without Smart Objects. Adobe defaults to them for Generative Fill to keep the process "non-destructive" (meaning you can change your mind later), but you can flatten them at any time. 

What I do is I make a duplicate of the original layer so, I can see a before and after (lock the orginal layer). While using the different retouching tools to the clone stamp to the generative tool, I would sometimes merge the layers as one and continue. If you don't want to merge your layers yet, select your Clone Stamp tool and look at the top menu bar. Change the "Sample" dropdown from "Current Layer" to "All Layers." This allows you to paint on a new blank layer while pulling pixel data from the photo underneath.