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I know you said you have primary key defined already but just to make sure, can you follow these steps:
1) Double click on dimension table
2) go to tab 'Keys'. check if your primary key is defined there.
3) If not, in 'Key Name', type in the key name
4) select the primary key(column) in 'Columns'.
5) Click OK.
and then try to create hierarchy by following these steps:
1) Right Click on the dimension table
2) Create Logical Dimension -> Dimension with Parent-Child Hierarchy...
3) Click OK (if you are OK with default values)