I know how the command is supposed to work. All you did was say what what the manual says. Please re-read my post, and test if possible -- anyone with the same version I have. The NEXT level, I will post a file.
Update: If I try this command all alone, in a New Drawing, it works. If I re-try the vertical Distribute Command in my drawing, again with small, identical circles, copied with the Rubber Stamp, and with Ortho on, Vertically, it does not work. I chose carefully so that no other Objects, other than the circles were selected. The only difference I can discern, is that, in My Drawing, I have chosen a "Workplane by Facet".
So, is the Distribute Command working only in some default Workplanes?