Check
logarchmeth1 - Primary log archive method configuration parameter - IBM DB2 9.7 for Linux, UNIX, and Windows
->
2. If you update the userexit or logretain configuration parameters logarchmeth1 will automatically be updated and vice versa. However, if you are using either userexit or logretain, logarchmeth2 must be set to OFF.
What setting do you have for logarchmeth1? If you issued the commands in the given order logarchmeth1 is USEREXIT. Do you have a userexit program?
I'ld recommend to just update logarchmeth1 and don't update LOGRETAIN and USEREXIT. If you set logarchmeth1, then LOGRETAIN will be set automatically.
Also if you set logarchmeth1 for the first time the databases needs to be deactivated and you have to take an offline backup of the database.