It may seem like it's not working but it takes a little time for it to bring up the list of apps depending on how many you have installed on your phone. After you press it, be patient. Your list of apps will show up eventually for you to choose one.
You should install a dock replacement app from market becaise there is a number of better ones than the stock one or you can just use NoDock from market and it allows you to disable the default dock app and you can use your original home screen.. This is what I decided to do and it works alot better.
Download Custom Car Home from the market. Its a better car dock than the stock on. You customize all of the apps you want to have on the dock and there are multiple screens that you can have.
I tried Car Dock 2 and I had issues with adding buttons, it always said the widget was to big to display or the ones that did show was still the small buttons.. I decided to gave up and uninstalled but it looks promising.