I'm using Illustrator CS, though I also downloaded a trial of CS5 and this behavior is the same.
I have a brochure with columns of justified text 5" wide. I noticed that Illustrator wasn't breaking "multi-functional" on the hyphen and instead gave the previous line tons of word spacing. Testing with a new document, I can't get Illustrator to break on a hyphen, which seems baffling.
I don't want auto-hyphenation, but I tried turning it on and fiddling with its settings until it broke at the hyphen. Strangely, it then didn't justify the line ending with "multi-". Not good.
I also tried inserting a soft-return after "multi-" and again Illustrator didn't justify that line.
The workaround seems to be to use a hard return and set the first paragraph to justify all lines and remove the "space before" setting of the rest. This seems like a horrible kludge.
Is there a better approach?