We have found a bug in Conditional Formatting in SharePoint 2010. You set up the conditional formatting logic as you normally would and it just doesn't work (e.g. if you set up a Hide condition for certain circumstances it always hides).
If you click the Advanced button and look at the XPath information you'll see that the field names have been prepended with $thisNode/ and have an extra full stop (period) at the end. To resolve this remove the extra text and magically it works!