responsetimeout not working

[billn]

I have the following routes in my extensions.conf file

exten => 7029910135,1,Answer
exten => 7029910135,2,Set(TIMEOUT(response)=10)
exten => 7029910135,3,Background(welcome_xantek)
exten => 7029910135,4,Background(silence_5)


exten => i,1,Playback(invalid_digit)
exten => i,2,Goto(7029910135,3)

exten => 1,1,Dial(SIP/Xantek701,15,rt)
exten => 1,2,Voicemail(u7000)

The welcome_xantek message is a routine "press 1 for sales, etc type message"

According to the manual, the timeoutresopnse command (this is the format for asterisk 1.2) is supposed to wait for 10 seconds to allow the user to press a key. But this does not happen. Without the background paying of 5 seconds of silence (line 4), the phone will hagup immediately after the completion of the welcome_xantek message. Does anybody understand this problem?