I was having the same problem as many with the Visual Editor in WP 2.5. I cleared the cache in all browser types: Firefox, IE, Opera and Safari and was still having the same problem. I even called my host to make sure everything was what was needed). I was able to fix (or work around) the problem by doing the following:
1. I installed the plugin: TinyMCE Advanced.
2. After installing and activating the plugin. I again cleared the cache. Closed and reopened the browser. Then after logging in and opening a post to edit I had to again refresh.
– Presto.. It’s working! I can add links!
Hope this may help others.