I had the same issue with my iPhone4. In Contacts I had the number setup as 1(866)-whatever then two pauses:
1(866)-whatever-pp-othernumbers. It worked up to a point when I updated the iOS. Then, when I tried to dial the number, the iPhone would just not do anything.
I edited the number, and replaced pp with ,, by selecting "pause". I assume the comma , replaced p as the symbol of pause in iOS5 or whatever update was.
Try this and let me know how it works.