I suggest trying the
Webster's Dictionary 1913 or
Wordnet Dictionary for Mobipocket. These definately work. Dictionaries are large, but putting them in internal memory (rather than on a card) seems to cause fewer problems. For one thing, ebooks in Books/Mobipocket in internal memory are not put in a subdirectory when opened.
If one of the free dictionaries work, then perhaps there is something wrong with Merriam-Webster's Collegiate Dictionary. Some dictionaries use features that are not supported by the Java MobiPocket Reader, but all are supposed to support lookup.