The text is clear what to type for when you're using the HTML editor, but the line about the Rich Text is sort of 'missing' a step. I'd like to suggest a change something like the following:
"If you are using the Rich Text Editor, you will need to type the link text first (username or site). Then, select that text and click the appropriate toolbar button to generate the link."
The step to actually click the appropriate button isn't spelled out, and I think it's a pretty minimal addition to throw that in. Makes it clear that they need to actually click something to get the link.
Perhaps even throw in the appropriate button images like there is in the lj-cut FAQ [http://www.livejournal.com/support/faqbrowse.bml?faqid=75&view=full].
Anyway. Just a thought. Thanks!