How does IT prioritize the individual systems within each activity that IT has to enable?

First is important to note that the RPOs and RTOs do not belong to IT. They belong to the business activities that must be recovered. IT is the enabler of such objectives.

Considering that, you need to align with each department which is the RPOs and RTOs for each system they use. The RPOs and RTOs to be used by IT for each system will be the shortest ones identified among all departments.

For example, in case a department has an RTO of 8 hours for a system, and another department has an RTO of 12 hours for the same system, the RTO to be used for IT to recover this system is 8 hours.

Regarding granularity, neither ISO 27001 nor ISO 22301 defines the level of detail. You only need to ensure you have enough information to provide confidence the activities can be performed as expected.

I'm still a bit unclear.

What if there are several IT systems within an activity? Let's say Department X has an RTO of 8 hours and has four IT systems to bring online. Department Y has an RTO of 9 hours with three systems to bring online. I'm assuming the BIA that IT uses to bring systems back online would first start with Department X's systems (because of the smaller RTO) and bring the four IT systems within Department X based on shortest RTO?

You can use this approach of considering the department's RTO to prioritize the recovery of all systems, as you exemplified, but you also should consider the dependencies and interrelationships between the systems to identify if you need to recover all systems in a department's defined RTO or not.

For example, in case of Department X requires only two systems to be recovered in 8 hours, because they depend on each other, and the other 2 systems will be needed only after 4 hours the first 2 are recovered (please note that with 2 systems with RTO of 2 hours, and two other systems with RTO of 4 hours, the department's RTO is still 2 hours, the shortest RTO between department's systems), this means that during 1 hour you can focus your resources on recovering systems of Department Y with the 9 hours RTO.

Thank you very much. So that makes more sense. Once the RTO analysis is done, I can summarize the systems within an activity to the shortest requirement. That becomes the activities RTO. That actually makes it easier and a bit more manageable to prioritize. After resorting an activity based on their shortest RTO, I can then move to the next. That makes a lot of sense!!

The next area I am having difficulty bridging is after the analysis phase is complete, we are to move into strategy. Which is simply coming up with the resources to support the analysis. Shouldn't we just move from analysis to plans because we will assign resources to the steps or checklists created for each area line incident response, etc. 

In other words, why do it separately? I can create a checklist of what needs to happen if the building burns down and from that checklist determine who and what will be needed to satisfy that? Does that make sense?

Please note that after finishing the analysis you have activities prioritized and impacted assets, but you still did not decide on the strategy on how to provide those resources, so it is not possible to go directly to definition of resources to support the continuity and recovery plans.

For example, to support an 8 hour RTO, an organization can go for its own alternative site or work with a third-party provider, each option will have different resources to be allocated.

In another scenario, to ensure data availability, alternatives may be backup copies kept in another site, or outsource backup.

The main solution, i.e., the strategy, is decided by the top management, with support of business continuity staff, and only after that, you can start to think about resources to be allocated.

This article will provide you a further explanation about business continuity strategy:
- Can business continuity strategy save your money? https://advisera.com/27001academy/blog/2010/03/15/can-business-continuity-strategy-save-your-money/

This material will also help you regarding business continuity strategy:
- Developing the business continuity strategy according to ISO 22301 [free webinar on demand] https://advisera.com/27001academy/webinar/developing-the-business-continuity-strategy-according-to-iso-22301-free-webinar-on-demand/