So this has been resolved now. I had two separate cases. With one case, repeatedly adding and removing the 2TB disk and rebooting Panorama in between eventually solved the issue and after try N, it finally took the system-mode switch command. With another case, this did not happen and the solution was to temporarily add another 2TB disk and then with both of them attached, it finally took the command and switched to Panorama mode.
After the switch has been done, you can happily remove all those (thin provisioned) disks and add as small disk as you'd like if it was a lab setup, e.g. 60GB.
Good advice is expensive but free advice is never appreciated
