If you read the little balloon help that pops up when you hover over the button it says “Alt-click to create a compound shape.”
In CS4 it immediately creates and expands the object(s) if you click on the button. You have to Alt click it to get a compound shape (editable).
In previous versions it used to be the other way around. I guess they re-invented the wheel.
If it doesn’t work like this for you, then you prolly have an open object. Maybe even 2 anchors laying on top of each other which are not connected to fool you as if you had a closed object.