I don't have a clue I'm still using CS3 and everytime I try it, it works fine for me.
If both elements are on the same layer, and outlines are created for type, both are selected and touching, then if I click merge they merge.
Do any of the other commands work, Exclude Back, Exclude Overlap etc?
I don't know what else to tell you it sounds like you are doing the right things. The only thing that I did notice when I was fooling around was that it doesn't work it the two items are grouped, only if they are both selected.
I'm not the biggest Illustrator guru, I don't use it very often myself, mostly I work with Photoshop and Indesign but I can usually get it to do what I need it to.
If you are working on something that has a deadline you could try putting the type together in Photoshop in at a very high resolution, (1200 ppi or more) so that it is very clean and then importing it into Illustrator.
Then you could use trace to create your logo in vector format, then add the outline etc. This is only a work around but it would get the job done.
Have you tried just drawing a couple of shapes, a square and a circle and see if they will merge? That should be a no brainer, if that doesn't work some thing is wrong.
You might try Adobe Forums.
Maybe you will find someone who has experienced this.
Mike