You may have a version mismatch problem. TeX's hyphenation system changed
between version 2.9 and 3.0. If you are using (plain) TeX
version 3.0 or later, make sure your plain.tex file has a
version number which is at least 3.0. If you are using LaTeX 2.09 you
should consider upgrading to LaTeX2e; if for some reason you can't, the
last version of LaTeX 2.09, released on 25 March 1992, is available
(for the time being at least) from obsolete/macros/latex209/distribs/latex209.tar and ought
to solve this problem.
If you're using LaTeX2e, the problem probably arises from your
hyphen.cfg file, which has to be created if you're using a
multi-lingual version.
For the curious, here's what happened:
before TeX 3.0 the hyphenation algorithm would not
break a word if the part before the break was not at least two
characters long, and the part after the break at least three
characters long. Starting with version 3.0 the parameters
\lefthyphenmin and \righthyphenmin control the length of these
fragments. These are set to 2 and 3, respectively, in the new
plain and lplain formats. They can be set to any value, of course,
but if \lefthyphenmin+\righthyphenmin is greater than 62, all
hyphenation is suppressed.
A further source of oddity can derive from the 1995 release of Cork-encoded fonts, which introduced an alternative hyphen character. The LaTeX2e configuration files in the font release specified use of the alternative hyphen, and this could produce odd effects with words containing an explicit hyphen. The font configuration files in the December 1995 release of LaTeX2e do not use the alternative hyphen character, thus removing this source of problems.