The links icon options do not show up until AFTER you highlight something in the text area. After you highlight, you get the link images and within that feature you can link to another url or do various other things.
Now what drives me berserk is how Moodle 2 has decided that underlining or changing the color of links is not important. I am going crazy in my classes trying to find links other students make in their posts unless they intentionally underline the links and/or highlight them. I don't think that was a BSU choice- I think it is a default feature of Moodle 2.
I hope this helps.
Even if I highlight first I don't get a link option. I'm not getting any link options anywhere in firefox or moodle. This is driving me crazy because I've never had issues with this and its such a useful tool to have. Any other ideas? Yes I also find that frustrating.. I like having colors and underlines to identify links.