Broken Blur Tool?

I really can't tell. It should work. Did you try other brushes and got the same result? Maybe there's something wrong with the settings for this particular brush like really wide spacing or something like that. One thing that keeps happening to me that is really frustrating is when I work with very large files I sometimes accidentaly make a very small selection and then nothing works....because it's not in the selection....but if you say you tried this with other files too and it doesn't work...I dunno. Best guess right now would be something wrong with the brush settings

The blur tool of Photoshop works very slowly , meaning it only blurs a little bit at a time. I would suggest as others have in this same thread, select the area - feather the selection - and run Gaussian Blur til you like it. I often make a duplicate of the layer Blur the heck out of it with Gaussian Blur, then add a layer mask and paint away the places I want to remain crisp.

Good Luck

What is the color mode of the blur tool? try to set it to "normal"