I am not sure what your problem is.. but as nobody has profered any suggestions.
I just opened a text box - wrote link test, selected.- Insert> ( the four options offered - I selected Bookmark and it opened the inspector showing bookmark. The text link was underlined and blue!
I repeated using any word on the page... no problems.
In the inspector I selected Bookmark and went to the Book column right of screen - clicked on a page and in the inspector clicked the + and it inserted " Bookmark" and the page number I had selected.
First time I tried this!! now I have to find a use for it!
My post shows what I did to create a text link using the Insert > Hyperlink > Bookmark option.
gadgetgurl42 said he could not make an active link. I had no trouble. So to anwser your question.. I did not see what he saw! Which was a greyed out set of insert options.
I did not say he was doinbg anything wrong, I simply tried to do what he wanted ... and then explained how I did it.
While my post shows its possible , if he /she cannot do it then your post about a re install is sound advice.