i tried that on a sample report and it seemed to work fine on my end. Actually what i did is i followed the wizard to create the report, and i added a grouping from the wizard and even the sort order from a "next" screen in the wizard, and then when i went to the sorting/grouping window, that's how the wizard got it to work.
What you can do is try to create a similar report using the wizard and set the grouping and sorting from the wizard (that should work fine), eventually compare the grouping/sorting properties to see what you have different and amend accordingly.