I want to give permissions to a specific user on a remote machine on my local network. In the Select Users or Groups dialog the From This Location field is locked to my computer, when I click the Locations... button the only option in the list is again only my own machine. How can I add a remote computer there so I can select users from other machines?

The remote computer is in my Homegroup, and same Workgroup, generally I don't have problem with file sharing, IP networking, etc. Just need to find a way to get permissions to specific users on that computer.

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You can't. Your computer does not have knowledge of the users in the remote system. In order to provide permissions for a specific user, you must create a user on your local computer and give the credentials to the (human) user of the remote system.

The From This Location field is a feature to locate users in another domain or organizational unit and can't be used to select another computer.

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