OK, one issue was that Privoxy when installed is NOT configured to use
TOR.

After I followed install instructions for Privoxy as explained here:

http://www.torproject.org/docs/tor-doc-unix.html.en

I can use TOR but ONLY if I enable Privoxy manually by configuring
Firefox proxy settings (as shown in the previous screen shot).

I'm not sure what is the best course of action with this, if this is
intentional Privoxy behavior and should be left as it is, if I should
enter a bug or what. Please advise on this. IMHO when installing
torbutton form synaptic, it should also install tor and privoxy properly
configured, but I can be wrong.

Still, if I click on torbutton and enable it, I am now hanging on each
page I try to visit and I get a blanc tab as shown in included screen
shot.

** Attachment added: "Blank tab when enbling torbutton"
   http://launchpadlibrarian.net/18289009/Screenshot-Mozilla%20Firefox.png

-- 
Torbutton say it is using Tor but it isn't
https://bugs.launchpad.net/bugs/273027
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