When editing a contact’s phone number and you want to insert a pause, tap the + * # key at the lower left of the screen. After you tap this key, the keyboard layout will change with a pause key in the center.
To insert a pause, simply tap the Pause key. After you tap this key, the keyboard will revert to the normal layout.
The phone number displayed on the screen will show a comma where a pause has been inserted. For longer delays you can insert more pauses. Then the extension number.
I have the same issue. the pauses and waits are entered exactly as you stated and as the apple instructions tell us to do, however on my 3GS phone 5.1 they do not seem to work. If it is a pause it never dials the number after the pause. If it is a Wait the Dial button appears however it will not dial if I tap that button. The button is black, you can see the additional number in it that it should be dialing but never does anything.