Hey sbradley,
I've tested this with rows and it does work, but there are a few things to consider:
1) Ensure you are using "==" and not "=" to compare. i.e. IsNullOrEmpty([Item])==True
2) Also once you are finished editing the formatting rule it must be added to the Formatting Rule Editor List (picture below)
3) Lastly, if this is a Detail Report (a sub report for each Detail) then you must set the Data Member for the formatting rule.
I've attach some pictures to hopefully make it a bit clearer.
Sam