Okay, after poking around the FreeHand newsgroup, I have found out two things, one of which is the solution to my problem:
You can either use the "inset path" operation twice to achieve the desired affect, or, you can use the Illustrator 5.5 plug-in, but not the Illustrator 8 plug-in.
The other thing I learned is that Macromedia completely screwed up the pen tool in FreeHand 10 to make it more like Illustrator, but they screwed everything up by only doing it half-assed. The disappointment is double for all of us FreeHand supporters who actually PREFER the way the old FreeHand pen tool works to the Illustrator pen. So it doesn't look like I'll be upgrading to FreeHand 10 at all until they restore the original pen tool functionality, OS X or not.
Way to go Macromedia

. Go ahead and alienate your entire installed base

.
And to think... I was thinking of actually BUYING the product

.