Somehow I ended up without colliders on my enemies, which leaves them invisible to the raycast; easily solved by adding and sizing a capsule collider.
I was in the same boat. Not sure how I missed that part! It was driving me crazy until I added a cube to the scene and that worked to trigger the cursor animation. I made a guess that the other Ethan models do not have colliders on them. I placed a capsule collider over them and Voila! I updated the prefab and it seems to be working! However I still have the issue that Ethan can walk right through them.