I am using ArcGIS 10, I'm not sure what the difference between this and your version is.
I tried following what you did and it worked the first time, whenever I tried to replicate it though, it did not.
Whenever I try to save a .csv file I have three options, to save it as a CSV (Macintosh), CSV (MS-DOS), or CSV (Comma delimited).
I have tried all of these, even though I was pretty sure the Macintosh one wasn't going to work, I tried it anyway. I think I saved it as the second one the first time I tried it (the time that worked) but after that I get the same results I did before. It runs the points to line, the layer shows up on the left, but nothing shows up on the map and after that when I try to click anything ArcMap doesn't respond and I'm forced to close the program.