How do I block inventory for online reservations but still want to be able to book on the grid

You need to create managed inventory for online bookings, first you click Channel->Inventory Allocation, and you can choose All Units or the unit type that will allow online booking. To set inventory click the Fill button, this will bring up a date selector so you can set a date range and assign the number of units to be blocked from online bookings. The Inventory Allocation will then show what inventory is available and what’s blocked.