I use Illustrator (CS5) for mapmaking myself. (see other Illustrator thread)
However, I tried to reproduce your problem:
compound paths can only be made if paths are either touching/overlapping or one inside the other.
... but Illustrator always allows me to create compound paths (equates to "Unioning" in Inkscape) regardless of touching. Select all paths in question, go to Objects --> Compound Path --> Make.
- does always work, even if paths are not touching.
Can you specify your problem?
btw. I really like your Japan map, the SVG looks pretty.