I tried this feature in my PD9 with several photos in the timeline, before producing the video, and selected the feature you described and selected red eye removal and selected all and it worked OK. Frankly I have never used this feature but find it very interesting.
The only answer I have is: Is some of your photos in the timeline already been edited in some way that Cyberlink will not work? I have no answer to your problem unless you supply more information e.g what photos are being used and have you already edited them in some fashion in the timeline or have you already installed transitions in the timeline.
Sorry
Windows 8 Pro 64bit
Cameras. Panasonic AG-HMC40, GoPro Hero 3 Black
Edition.