. Your problem lies in the fact that the 'o' you are trying to give an effect is two separate paths, probably in a group. Effects like offset will not work properly, indeed. You will want to select all the o's paths and then make them into a Compund Path: Object > Compound Path > Make or right click > Make Compound Path.

Besides, this effect is more easily achievable using the Appearance panel:

1. Type your text. If you want part of the letters to have the effect, type them as a separate object;
2. Be sure the object is selected;
3. Open the Apperance panel, Window > Appearance or Shift+F6;
4. In the panel, select the characters object and choose Add New Fill, either through the panel options or the filled square icon in the lower right:
   
5. With that fill selected, give it a different colour and choose Effect > Path > Offset Path. Use Preview to fiddle with the offset value;
6. In the Appearance panel, drag the new fill below the characters. The Appearance panel works just like a layers panel.
7. Repeat with different colours and different offset values to create a multi-stroke effect.

Be sure during the whole process that your object stays selected, or it will not pick up the changes you make in the Appearance panel.

Your problem lies in the fact that the 'o' you are trying to give an effect is two separate paths, probably in a group. Effects like offset will not work properly, indeed. You will want to select all the o's paths and then make them into a Compound Path: Object > Compound Path > Make or right click > Make Compound Path.

Besides, this effect is more easily achievable using the Appearance panel:

1. Type your text. If you want part of the letters to have the effect, type them as a separate object;
2. Be sure the object is selected;
3. Open the Apperance panel, Window > Appearance or Shift+F6;
4. In the panel, select the Characters object and choose Add New Fill, either through the panel options or the filled square icon in the lower right:
   
5. With that fill selected, give it a different colour and choose Effect > Path > Offset Path. Use Preview to fiddle with the offset value;
6. In the Appearance panel, drag the new fill below the characters. The Appearance panel works just like a layers panel.
7. Repeat with different colours and different offset values to create a multi-stroke effect.

Be sure during the whole process that your object stays selected, or it will not pick up the changes you make in the Appearance panel.

This is easily achievable using the Appearance panel.

1. Type your text. If you want part of the letters to have the effect, type them as a separate object;
2. Be sure the object is selected;
3. Open the Apperance panel, Window > Appearance or Shift+F6;
4. In the panel, select the characters object and choose Add New Fill, either through the panel options or the filled square icon in the lower right:
   
5. With that fill selected, give it a different colour and choose Effect > Path > Offset Path. Use Preview to fiddle with the offset value;
6. In the Appearance panel, drag the new fill below the characters. The Appearance panel works just like a layers panel.
7. Repeat with different colours and different offset values to create a multi-stroke effect.

Be sure during the whole process that your object stays selected, or it will not pick up the changes you make in the Appearance panel.

. Your problem lies in the fact that the 'o' you are trying to give an effect is two separate paths, probably in a group. Effects like offset will not work properly, indeed. You will want to select all the o's paths and then make them into a Compund Path: Object > Compound Path > Make or right click > Make Compound Path.

Besides, this effect is more easily achievable using the Appearance panel:

1. Type your text. If you want part of the letters to have the effect, type them as a separate object;
2. Be sure the object is selected;
3. Open the Apperance panel, Window > Appearance or Shift+F6;
4. In the panel, select the characters object and choose Add New Fill, either through the panel options or the filled square icon in the lower right:
   
5. With that fill selected, give it a different colour and choose Effect > Path > Offset Path. Use Preview to fiddle with the offset value;
6. In the Appearance panel, drag the new fill below the characters. The Appearance panel works just like a layers panel.
7. Repeat with different colours and different offset values to create a multi-stroke effect.

Be sure during the whole process that your object stays selected, or it will not pick up the changes you make in the Appearance panel.