You may have solved this problem by now - but if not then read on.
I had exactly the same symptoms when I first tried to use the FM Radio app.
I suggest you check that the earphone jack is fully plugged into the socket - that last 0.5mm makes all the difference. I thought mine were plugged in at first, despite continually getting an error message saying 'earphone not connected'. Turns out that the error is correct - you need to fully push the jack home.
Choosing the speaker option is not a work around - the radio uses the earphone wires as an antennae, so are required in any case.
The on/off button will be red/green when operating correctly. Just select menu > scan > scan option to find stations, then you should be away.
Hope this helps.