Currently using 2010 but it sounds like the line was selected for the dim or the two endpoints were used, if you select the two parallel lines it should do like you said.
I am using 2011 and it is not having the described issue. If I constrain your square with the origin (or any point to hold it) It fully defines and I can add radii without trouble.
Are you dimensioning to the point in the corner or the line on the side?
Not sure what was going on, but seems to work ok now...