Is that menu entry grayed (disabled)?

Start Firefox in Diagnose Firefox issues using Troubleshoot Mode to check if one of the extensions is causing the problem (switch to the DEFAULT theme: Firefox (Tools) > Add-ons > Appearance/Themes).

• Don't make any changes on the Safe mode start window.
• https://support.mozilla.com/kb/Safe+Mode

• Troubleshoot extensions, themes and hardware acceleration issues to solve common Firefox problems

In Firefox 4 you can use one of these to start in Safe mode:

• Help > Restart with Add-ons Disabled
• Hold down the Shift key while double clicking the Firefox desktop shortcut (Windows)

No, "Clear Search History" is not grayed out, it just does nothing when I try to click on it.

I'm having the same problem, but it actually started before I downloaded Firefox 4. When you click the drop down box and hit the "Clear search history" link at the bottom, it just clicks off the drop down box and nothing happens. It used to work but no longer does. Could it be an add-on conflict or is something else going on?

I'm actually using Windows 7.

Now that I think about it, it stopped working with the previous version of FF with me too. I'm using Win XP.

It is possible that there is a problem with the file that stores the "Saved Form" data.
Rename or delete formhistory.sqlite (plus formhistory.sqlite-journal and formhistory.sqlite.corrupt and formhistory.dat, if they exist) in the Profile Folder in case there is a problem with the file that stores the "Saved Form" data.
This will remove all saved form data, so you may want to rename formhistory.sqlite to formhistory.sqlite.sav or move the file to another folder in case you need to recover some saved data.

You may also need to delete search.sqlite and search.json in the Firefox Profile Folder